6. An insurance portfolio produces N claims with the following distribution:n Pr(N = n)0.10.50.4Individual claim amounts have the following distribution:Sx(x)0.0.7100.2200.1Individual claim amounts and counts are independent.Stop-loss insurance is purchased with an aggregate deductible of 400% of expected aggregateclaims.Calculate the net stop-loss premium.

We have the following information with us as follows : N= number of claims X= Individual claim…

Answered: 6. An insurance portfolio produces N…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Multiple Choice Assume that a company is considering purchasing a machine for $45,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. The profitability index for this investment is closest to: Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. 0.85. ○ 1.14. ○ 1.18. о 1.24.
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22:23 A stock has had the following year-end prices and dividends: Year 123456 6 Price $ 64.33 71.20 77.00 63.27 73.11 79.75 Dividend Arithmetic average return Geometric average return $.60 .65 .71 .80 .87 What are the arithmetic and geometric returns for the stock? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, 32.16. 6.20 % 5.46 %
Stocks A and B have the following historical returns: Year 2016 2017 2018 2019 2020 a. Calculate the average rate of return for each stock during the period 2016 through 2020. Round your answers to two decimal places. Stock A: % % Stock A's Returns, ra (20.60%) 39.75 17.25 (3.50) 25.00 Stock B: b. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would the realized rate of return on the portfolio have been each year? Round your answers to two decimal places. Negative values should be indicated by a minus sign. CV Stock A Stock B's Returns, B (14.30%) 29.80 37.30 (6.60) 11.70 Year 2016 2017 2018 2019 2020 What would the average return on the portfolio have been during this period? Round your answer to two decimal places. Portfolio % c. Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places. Stock B % Portfolio % Stock A % Standard Deviation d. Calculate the coefficient of…
Suppose that you have the following payoff table: State of Nature Decision 51 S2 di 250 100 d2 100 -50 150 Suppose that p-0.75 would make you indifferent between a guaranteed payoff of 150 and the lottery. Find your risk premium for the payoff of 150. The answer has no decimals.
Q3. Suppose that the market default rate for bonds is given by 0.01, i.e., the probability the market believes that the company may not be able to pay the owner of the bonds is 0.01. Now a credit default swap (CDS) is sold at fair price $ 0.01 per unit. Ackman expects that the true default rate is 0.05, not 0.01. Ackman bought 67 billion units of CDS at the price $ 0.01 per unit. a. Suppose that Ackeman's expectation about the default rate is not correct. I.e., the true default rate for bonds is given by 0.01. Find the cost of the purchase. Find the expected payoff. Find the profit. b. Suppose that Ackeman's expectation is correct. Find the cost of the purchase. Find the expected payoff. Find the profit.
A proposed project has the following cash flow estimates.Assuming statistically independent cash flows, a normally distributed net present value, and a minimum attractive rate of return of 15%, determine the following. For the following questions, employ an analytical solution: a. the mean and standard deviation of net present value. b. the probability that the net present value is negative. c. the probability that the net present value is greater than $1,000,000. Assume the initial investment and annual receipts are normally distributed. d. Using a Monte Carlo simulation with 10,000 iterations, estimate the probability that the present worth is negative.
2. For a 3-year term insurance at age x with death benefit of 1,000 (with death benefit payable at end of year), you are given : i. Px = .97 ii. i= 6% The present value of death benefits at age x is 153. The net level annual premium is 56 (with premium payable in advance for 3 years subject to survival). Calculate px+2 iii. iv.
3. Suppose Par = $10,000,000; PO = $7,500,000; T = 3; d = 0.006; m = 0.7 and π = 0.5. Then what is the expected zero rate? * O a. 9.97% pa. O b. 8.92% pa. O c. 7.92% pa. O d. 9.64% pa. O e. 9.92% pa.
The Arrow-Pratt measures of absolute and relative risk aversion respectively describe the willingness of a consumers to risk a fixed amount of wealth or a fixed fraction of their wealth. This problem will demonstrate this by setting up a simple investment problem. Suppose that consumers begin with initial wealth Wo and may buy shares of a risky asset whose payoff per share is given by 2. (1 w/ prob. P, X = 1-1 w/ prob.1– p. Therefore buying { shares of the risky asset yields final wealth W = Wo +X. Suppose that each consumer may buy an unlimited number of shares, and seeks to maximize expected utility of final wealth max E[u(W)]. (a) Expand the consumer's expected utility maximization problem, and find the first order condition. (b) Let Cara be a consumer whose utility function exhibits constant absolute risk aver- sion UA(W) = 1– e-aW Find Cara's optimal number of shares and show that it does not depend on her starting wealth Wo-
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