Insurance company costs on a pro rata basis

Assignment Help Accounting Basics
Reference no: EM13993539

An insurance company's losses of a particular type per year are to a reasonable approximation normally distributed with a mean of $150 million and a standard deviation of $50 million. (Assume that the risks taken on by the insurance company are entirely nonsystematic.) The one-year risk-free rate is 5% per annum with annual compounding. Estimate the cost of the following:

a. A contract that will pay in one-year's time 60% of the insurance company's costs on a pro rata basis

b. A contract that pays $100 million in one-year's time if losses exceed $200 million.

Reference no: EM13993539

Questions Cloud

Describe ethical dilemma-current nursing practice : Discuss/ describe an ethical dilemma you have faced either in current nursing practice, during a clinical rotation or in a current work situation. Identify which ethical principle(s) were being violated and how. Describe the outcome of the dilemma an..
Suppliers prices for the required parts and recommends : The buyer checks the suppliers' prices for the required parts and recommends two suppliers. The purchasing manager chooses the supplier and four copies of a purchase order are issued.
Between horizontal and vertical : Between horizontal and vertical, choose which type of structure you believe to be the most effective in the majority of businesses. Explain why you made this choice. Provide an example from the real world or your personal life where this type of stru..
Prevention-appraisal and internal failure costs : How would you describe the following costs of quality to your subordinates: prevention, appraisal, internal failure costs, and externals failure costs? Analyze what quality costs are always parts of doing business.
Insurance company costs on a pro rata basis : a. A contract that will pay in one-year's time 60% of the insurance company's costs on a pro rata basis b. A contract that pays $100 million in one-year's time if losses exceed $200 million.
Would low risk drivers purchase insurance at that premium : Show that if the insurance company could separate drivers without the devices and offer full insurance at the actuarially fair premium of $5,000, the higher risk drivers would prefer insurance to no insurance.
Engaged in the government-industrial-international market : How important is ISO 9000 to most companies engaged in the government, industrial, and international market? Explain the two concepts of ISO 9000. Most companies are certified or becoming certified under ISO 9001: 2008 or for aviation companies AS 90..
Connect the larger discussion to some specific songs : Provide some quotes from Palmer’s Deep Blues and/or the other texts assigned to add some support and context to your points. Also, connect the larger discussion to some specific songs, including ones discussed on the worksheet--and quote from key lyr..
What is the maximum current drawn from the circuit : What is the total reactance of the circuit at 100 Hz, 1000 Hz and 10000 Hz? What is the maximum current drawn from this circuit at each of these frequencies?

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd