A patient believes that they face two possible states of health in the coming year, poor health with a probability of 20%, in which the anticipated yearly costs will be $10,000. There’s the state of good health, with a probability of 80% which will cost them $5,000. Let’s say the insurance policy offered to this patient costs $7,500 for the year. Is this policy actuarially fair? Why or why not? What is the policy’s loading factor?

A patient believes that they face two possible states of health in the coming year, poor health with a probability of 20%, in which the anticipated yearly costs will be $10,000. There’s the state of good health, with a probability of 80% which will cost them $5,000. Let’s say the insurance policy offered to this patient costs $7,500 for the year. Is this policy actuarially fair? Why or why not? What is the policy’s loading factor?

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter5: Deductions For And From Agi

Section: Chapter Questions

Problem 18MCQ

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