An insurance company uses the model of collective risks in multiple periods bymeans of a Poisson-compound-Exponential process. The Poisson intensity equals 20,and the mean claim per period is of $140. The company plans to continuosly chargethe equivalence premium with a loading percentage of 55%.What should the initial wealth of the company be, so that the probability of ruin isless than 5%?

Given:- Poisson intensity ()=20 claims per period- Mean claim = $ 140 per claim- Loading percentage…

Answered: An insurance company uses the model of…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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.A new, miracle diabetes drug that diminishes major symptoms of diabetes has been approved by the FDA. Health care professionals and researchers believe that the new drug will prolong lifespan of diabetes patients. If the population is in steady state and the incidence is constant, what will the effect of this new drug be on the prevalence of diabetes in the population? Explain.
1. ABC inc. stock is currently selling for $30, one year from today the stock price can either increase by 20% or decrease by 15%. The probability of an increase in the stock price is equal to 0.3. The one-year risk-free rate is 5% What is the value of a European put that expires in one year with an exercise price of $24. 2. Graphically, show the value and the profit and loss of the following butterfly position: Long in a call with an exercise price of $30, short in 2 calls with an exercise price of $45, and long in a call with an exercise price of 60. All calls are written on the same stock and have the same maturity. 3. "Early exercise of an American option on a stock that does not pay any dividend is not optimal regardless of whether the option is a Call or a Put". True, False, or Uncertain. Explain.
If a fictional treatment costs a total of $45,000 at today’s value and increases a person’s quality of life from 0.5 to 0.6 for the remainder of the person’s life from age 70 onward, and the person’s expected life span increases from 73 to 75, what is the total gain in QALYs (Quality-adjusted Life Years), and what is the ICER (Incremental Cost-effectiveness Ratio)?
(ii) A state predicts that it will need $2.15 billion for construction of new roads and maintenance of existing roads in year 2025. It is forecast that 1.5 percent of the vehicle-fleet in that year will be electric vehicles with the remaining being gas powered vehicles. The population of the state is forecast to be 10 million persons in 2025 with the average number of vehicles owned per person being 0.75. It is projected that on average each vehicle will be driven 12,000 miles per year, with gas powered vehicles achieving an average gas consumption of 25 miles per gallon (mpg). If the state plans to raise 99 percent of the required revenue from gas powered vehicles and the remainder from electric vehicles, (a) Determine how much each gallon of gas sold should be taxed to achieve the revenue target (b) Determine what the annual flat tax for each electric vehicle should be to raise the appropriate revenue target; (c) If the state decides to raise the required revenue based on a tax per…
(a)Consider a flight with a seating capacity of 160 seats. This flight is always full and there is a chance to be overbooked. The actual no-show rate (NSR) of the flight is 3.5% and the estimated NSR is 6.3%. If this flight is oversold according to the estimated NSR, what is the number of excess/extra passengers that will show up and there will be no seats for them on the day of departure? (b)Consider a flight with a seating capacity of 160 seats. This flight is always full and there is a chance to be overbooked. The actual no-show rate (NSR) of the flight is 3.5% and the estimated NSR is 6.3%. If the one-way fare of this flight is $300. If this flight is oversold according to the estimated NSR, what is the additional revenue that this flight will generate due to overbooking?
Vehicles arrive at a car detailing service at a rate of 10 per minute according to a Poissondistribution. For simplicity, assume that there is only one lane and one worker who can serve atan average rate of 12 vehicles per minute. Service times are exponentially distributed. Part A: What is the average length of the queue? Part B: What is the average time a vehicle must spend to get through the system? Part C: What is the utilization rate of the worker? Part D: What is the probability that when you arrive at the shop, there will be three ormore vehicles ahead of you?
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A city is spending $19.3 million on a new sewage system. The expected life of the system is 40 years, and will have no market value at the end of its life. Operating and maintenance expenses for the system are projected to average $0.8 million per year. If the city's MARR is 7% per year, what is the capitalized worth of the system? The study period is 100 years. The capitalized worth of the system is $ million (Round to two decimal places.)
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.
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