T(b+1) Hintxe-adx = ab+1 3. Total expenses for a portfolio of 5,000 independent insureds is assumed to follow a normal distribution such that S~ N( = 1,000,000, o = 50, 000). The insurer is considering im- plementing a new claim evaluation system that will add a fixed cost per insured of 1$, but should greatly reduce variance. If the insurer's goal is to reduce its reserve set at a 95% le- vel, what percentage of reduction in variance is necessary for the system to be worthwhile? Either code or use z=1.645.
T(b+1) Hintxe-adx = ab+1 3. Total expenses for a portfolio of 5,000 independent insureds is assumed to follow a normal distribution such that S~ N( = 1,000,000, o = 50, 000). The insurer is considering im- plementing a new claim evaluation system that will add a fixed cost per insured of 1$, but should greatly reduce variance. If the insurer's goal is to reduce its reserve set at a 95% le- vel, what percentage of reduction in variance is necessary for the system to be worthwhile? Either code or use z=1.645.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:b
Hint: foxe
-ax dx
=
T(b+1)
ab+1
3. Total expenses for a portfolio of 5,000 independent insureds is assumed to follow a normal
distribution such that S ~ N(μ = 1,000,000, σ =
o 50, 000). The insurer is considering im-
plementing a new claim evaluation system that will add a fixed cost per insured of 1$, but
should greatly reduce variance. If the insurer's goal is to reduce its reserve set at a 95% le-
vel, what percentage of reduction in variance is necessary for the system to be worthwhile ?
Either code or use z=1.645.
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