! 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%?

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Answered: An insurance company uses the model of…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 8MC

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The demand for a product of Carolina Industries varies greatly from month to month. The probability distribution in the following table, based on the past two years of data, shows the company's monthly demand. Unit Demand Probability 300 400 500 600 0.20 0.30 0.35 0.15 (a) If the company bases monthly orders on the expected value of the monthly demand, what should Carolina's monthly order quantity be for this product? (b) Assume that each unit demanded generates $70 in revenue and that each unit ordered costs $50. How much will the company gain or lose in a month (indoitars) if it places an order based on your answer to part (a) and the actual demand for the item is 300 units?
An investment plan allows investors to deposit a minimum of £1,000 at the beginning of the term, which pays a fixed return rate of 5% per annum. Af- ter a year, investors have to deposit a minimum of £800 with an expected return rate of 3% per annum for the second year and a standard deviation of 2% per annum. a. Find the expected value of the total minimum amount earned after two years of investment. b. Find the standard deviation of the total minimum amount earned after two years of investment.
Guy Fieri has purchased a significant plot of land in Northwest Ohio for his newest venture: FlavorTownship. This hub for mind-boggling flavor and entertainment is a strictly for-profit operation. Guy would like to keep Flavor Township open all year-round, but due to Ohio weather the following are the probabilities of when it will be open: |- 30% chance it is open 300 days a year |- 55% chance it is open 325 days a year |- 15% chance it is open 350 days a year Flavor Township will expect to host 14,000 people each day that it is open and expects an average revenue of $45 per visitor. This paradigm-shifting landmark will cost $420,000,000 to start the investment and will require annual costs (food, employees, etc.) of $115,000,000. Every 3 years, Flavor Township will undergo necessary maintenance that will cost $22,000,000. If the expected life of Flavor Township is 15 years and a 16% return is expected, what is the expected NPV of this project?
15
An estate agent advertises its houses in two media; Daily Graphic and Ghanaian Times. The agent believes that there is a relationship between the sales S and the amounts spent on the two advertising media. The relationship is given by; where, d is the amount spent in Daily Graphic and g is the amount spent in Ghanaian Times. The estate’s agent fee is 12½% and this includes the cost of adverting. If the agent has planned to spend only 200 thousand Ghana Cedis on advertisement, show how it should be allocated between the two media in order to maximize net profit.
Please no written by hand A bank has two $10 million one-year loans. Possible outcomes are as follows: Outcome Neither loan defaults Loan 1 defaults, loan 2 does not default Loan 2 defaults, loan 1 does not default Both loans default Probablity 97.5% 1.25% 1.25% 0.00%.If a default occurs, losses can use normal distribution with mean $5 million and standard deviation $1 million to approximate. If a loan does not default, a profit of $0.2 million is made. (a). What is the VaR for of each project when the confidence level (a). What is the VaR for of each project when the confidence level is 99%? (b). What is the expected shortfall of each project when the confidence level is 99%? (c). What is the VaR for a portfolio consisting of the two investments when the confidence level is 99%?) (d). What is the expected shortfall for a portfolio consisting of the two investments when the confidence level is 99%?
Please no written by hand and no emage Suppose a company can select among two decisions (d1 and d2) and face three states of nature (s1, s2 and s3) with the following payoff table: Decision s1 s2 s3 d1 150 200 200 d2 50 200 500 The probabilities of s1, s2, and s3 are unknown. Using the optimistic approach, what is the optimal decision and what is the value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to arrive at this decision in the second.
themepans i max Task 3: During the last 10 years, a corporation's net profit increased year over year 6 times and decreased year over babive969 with characteristicsmber of annual earnings increases for the next 10 years is modelled in 4 times. Assume that the accordance with quote of the binomial distribution. Estimate the probability that the corporation's net profit will increase in exactly 4 of the next 10 years. tot twee monteutimut ethomi smo bsd-.2.U A :clesT Diswiot brs toqe ert tuods noitsmotnleysb 08 ni utimut to insmqinle 6 101 000,000,83 vsqof ever lliw 2.0 woled nevig ai 29161 (AU3 8.0 ataoo 020) 008.0 02U AU3 eer.o 020 A03 9161 toqe tre etsi biswiot ysb-08
5
Problem 1 Synergy Company sells co-amoxiclav antibiotic. The probability distribution of the demand for co-amoxiclav antibiotic is as follows: Estimated Sales in Units 120 units 210 units 300 units Probability 0.12 0.18 0.22 The estimated demand for co-amoxiclav antibiotics this coming month using the expected value approach is 1. How much is Expected Value? S =
Explain probability and nonprobability samplingtechniques.
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