EBK EXPLORING ECONOMICS
EBK EXPLORING ECONOMICS
7th Edition
ISBN: 9780100544772
Author: Sexton
Publisher: YUZU
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Chapter 17, Problem 25P
To determine

To explain:

The way higher deductibles help to reduce moral hazard problems.

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An actuary analyzes a company’s annual personal auto claims, M and annual commercialauto claims, N . The analysis reveals that V ar(M ) = 1600, V ar(N ) = 900, and thecorrelation between M and N is ρ = 0.64. Compute V ar(M + N ).
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