Calculating the actuarially fair premium for example

Assignment Help Business Management
Reference no: EM131218617

Suppose a society contains two individuals. Joe, who smokes, and Tanya, who does not. They each have the same utility function U(C)=ln(C). If they are healthy, they will each get to consume their income of $15,000. If they need medical attention, they will have to spend $10,000, leaving them $5,000 for conumption. Smokers have a 12% chance of needing medical attention, and nonsmokers have a 2%chance.

An insurance company is willing to insure Joe and Tanya. The twist here is that the insurance companyoffers two different kinds of policies. One policy is called the "low deductible," (L) for which theinsurance company will pay any medical costs over $3,000. The other is a "high deductible," (H) for which the insurance company will pay any medical costs over $8000.

How do I take into account these deductibles when calculating the actuarially fair premium for example? How is the setup?

Reference no: EM131218617

Questions Cloud

Identify a common task that might occur regularly : Identify a common task that might occur regularly. The task should be one that might occur in a business setting rather than one in someone's personal life.
Find condition that characterizes solution to firm problem : ECON 3102-004 Intermediate Macroeconomics PROBLEM SET. Clearly state the problem of the firm. Find the condition that characterizes the solution to the firm's problem. In no more than 3 lines, explain the intuition behind your condition
What is the percentage point decrease in the unemployment ra : Suppose the unemployment rate in the United States goes from 6.4% in one year to 5.6% in the next.
What are the important facts that you need to emphasize : Create a list that contains all the criteria that you and your team members have identified together. Then, from the list, select a set of criteria that your team will use to determine the viability of solutions. Explain each solution in reasonabl..
Calculating the actuarially fair premium for example : How do I take into account these deductibles when calculating the actuarially fair premium for example? How is the setup?
What is the dramatic moment in the the fourth of july : What is the dramatic moment in the "The Fourth of July?" How does Lorde tell the story in a way that makes that moment especially effective? Explore this by analyzing the organization of Lorde's essay.
How many bits are left for address part of the instruction : How many bits are left for the address part of the instruction - What is the maximum allowable size for memory and what is the largest unsigned binary number that can be accommodated in one word of memory?
Allocation of resources is made using : Alvin Roth of Harvard won the 2012 Nobel Prize in Economics for designing systems that allocate resources in innovative ways. For example, he designed a system that matches donated kidneys to recipients waiting for such donations. This system take..
What are you thoughts on this presentation : What are you thoughts about companies collecting data about you? Do you feel this type of data collection is a beneficial or detrimental? Why? Do you feel you have a right to know what data companies are collecting about you? Does this concern you..

Reviews

Write a Review

Business Management Questions & Answers

  Explain your initial impression of the organization

Explain your initial impression of the organization based upon your initial review of their corporate website.Analyze their Vision, Mission and Goals in reference to the company's competitive strategy, branding and messaging

  Describe and derive an expression for the marginal cost

Describe and derive an expression for the marginal cost (MC) curve. Describe and estimate the incremental costs of the extra 200 pairs per week (from 1,000 pairs to 1,200 pairs of shoes).

  Problem regarding the act of misconduct

In comparison to her fellow employees, Serena is subjected to more severe disciplinary action for the same act of misconduct because she is a member of a protected group. Thus, Serena is a victim of disparate treatment discrimination.

  Think for a minute about organizational dynamics and

think for a minute about organizational dynamics and culture. palmer has been with mampm a regional accounting firm in

  Define the research questions for the identified problem

Define the research questions for the identified problem or opportunity - select the appropriate research methodologies and techniques to use for the research project

  While this case study supports a specific data

While this case study supports a specific data warehouse product, please locate another case study from another data warehousing Software Company and explain the data warehouse that was designed in that case study?

  Organizational communication and decision outcomesprepare a

organizational communication and decision outcomesprepare a scenario based on your personal experience where

  Explain the concepts of emergence structure agency and power

Reflecting on how business and their environments relate, explain the concepts of emergence, structure, agency and power. Using examples, explain how and why do businesses manipulate their environment

  Classify a product offered within an industry

Are there present bills/policies in the legislature at the state or national level supported or opposed by the American Heart Association.

  Develop positive energy for change

How can feedback be used to develop positive energy for change. How can it be detrimental to the change strategy

  Risk assessment and business impact analysis

You must first begin with a risk assessment and business impact analysis. Write a draft memo to the president of the university explaining the need for a business continuity plan. Be sure to include your recommendations on how you would implement ..

  Define long-term attractiveness of the industry represented

Explain What is your assessment of the long-term attractiveness of the industries represented in Sara Lee Corp.'s business portfolio and What is your assessment of the competitive strength of Sara Lee Corp.'s different business units?

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