Person A faces an 80% chance of having no loss and a 20% chance of having a loss of $50. Person B faces an 80% chance of having no loss and a 20% chance of having a loss of $100. Question 1: Suppose...

Person A faces an 80% chance of having no loss<br>and a 20% chance of having a loss of $50.<br>Person B faces an 80% chance of having no loss<br>and a 20% chance of having a loss of $100.<br>Question 1: Suppose Person A purchases full<br>insurance for an actuarially fair premium (AFP)<br>and<br>Person A is the ONLY person in the insurer's risk<br>pool:<br>a. What is the actuarially fair premium (AFP) of full<br>insurance for Person A?A<br>b. What is the amount of risk the insurer faces?<br>

Extracted text: Person A faces an 80% chance of having no loss and a 20% chance of having a loss of $50. Person B faces an 80% chance of having no loss and a 20% chance of having a loss of $100. Question 1: Suppose Person A purchases full insurance for an actuarially fair premium (AFP) and Person A is the ONLY person in the insurer's risk pool: a. What is the actuarially fair premium (AFP) of full insurance for Person A?A b. What is the amount of risk the insurer faces?

Jun 05, 2022

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Person A faces an 80% chance of having no loss and a 20% chance of having a loss of $50. Person B faces an 80% chance of having no loss and a 20% chance of having a loss of $100. Question 1: Suppose...

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