Head & Shoulders shampoo insured a spokesman football player’s long hair for $1 million with Lloyd’s of London. The insurance payout would be triggered if he lost at least 60% of his hair during an on-field event. The insurance company placed the odds of a payout at 1% in year 5. Determine how much Head & Shoulders had to pay in a lump-sum amount for the insurance policy if Lloyd’s of London wanted a rate of return of 20% per year, compounded quarterly.
Head & Shoulders shampoo insured a spokesman football player’s long hair for $1 million with Lloyd’s of London. The insurance payout would be triggered if he lost at least 60% of his hair during an on-field event. The insurance company placed the odds of a payout at 1% in year 5. Determine how much Head & Shoulders had to pay in a lump-sum amount for the insurance policy if Lloyd’s of London wanted a rate of return of 20% per year, compounded quarterly.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Head & Shoulders shampoo insured a spokesman
football player’s long hair for $1 million with Lloyd’s of London. The insurance payout would
be triggered if he lost at least 60% of his hair during
an on-field event. The insurance company
placed the odds of a payout at 1% in year 5. Determine
how much Head & Shoulders had to pay in a
lump-sum amount for the insurance policy if
Lloyd’s of London wanted a
per year, compounded quarterly.
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