FIL354 Risk Management
Step 2:
Complete the unshaded area below. Show your calculations, in full, for each step. (i.e. show the full computation for each year) (3 points)
Loss Year
2012
2013
2014
2015
2016
2017
2018
2019
Experience
Year
2012
5
8
10
18
27
2013
2
6
8
16
2014
3
7
10
2015
5
8
2016
8
b).
Based on historical data, assume you have estimated the average dollar amount of loss per claim for the next couple of years (see the table below). How much money should you budget today (year 2017) for future claims associated with products sold in 2016? Assume interst rate is 6% for the next five years. Round all
calculations to two decimal points. (4 points)
Year
int.
rate
$ per
claim
t
PV per claim
in 2017 Number
of
Claims
PV of claims
2017
6.00%
$11,900
0
2018
6.00%
$12,500
1
2019
6.00%
$12,900
2
Total
2
