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What is the amount of risk Lemonade Insurance Company faces if they sell contracts to both Rainie and Justin? Show your work d.

What is the amount of risk Lemonade Insurance Company faces if they sell contracts to both Rainie and Justin? Show your work d.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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part D

Now suppose Justin owns a $600,000 house and has a 5% chance of experiencing a fire in any given year. Assume as before that the fire will result in a total loss. Suppose the Lemonade Insurance Company offers Rainie and Justin the same insurance contract and charges them the same premium. In other words, they put Rainie and Justin into the same risk pool. What is the probability distribution of total losses for Lemonade Insurance Company if they sell contracts to Rainie and Justin? Show your work| a. b. What premium must Lemonade Insurance Company charge each of Rainie and Justin if they want to 'break even'? Show your work Will Rainie purchase this contract if she is charged the 'break-even' premium? Will Justin purchase this contact if he is charged the 'break-even' premium? Briefly explain your reason. C. d. What is the amount of risk Lemonade Insurance Company faces if they sell contracts to both Rainie and Justin? Show your work 3.
Transcribed Image Text:Now suppose Justin owns a $600,000 house and has a 5% chance of experiencing a fire in any given year. Assume as before that the fire will result in a total loss. Suppose the Lemonade Insurance Company offers Rainie and Justin the same insurance contract and charges them the same premium. In other words, they put Rainie and Justin into the same risk pool. What is the probability distribution of total losses for Lemonade Insurance Company if they sell contracts to Rainie and Justin? Show your work| a. b. What premium must Lemonade Insurance Company charge each of Rainie and Justin if they want to 'break even'? Show your work Will Rainie purchase this contract if she is charged the 'break-even' premium? Will Justin purchase this contact if he is charged the 'break-even' premium? Briefly explain your reason. C. d. What is the amount of risk Lemonade Insurance Company faces if they sell contracts to both Rainie and Justin? Show your work 3.
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