Find the smallest possible premium for each

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Reference no: EM131001695

On a single premium contract, the present value of the benefits takes the value 0 with probability 0.94, 1 with probability 0.01 and 3 with probability 0.05.

(a) Find the percentile premium for α = 0.95.

(b) Suppose the insurer plans to sell 2 contracts. Find the smallest possible premium for each, such that there is a probability of at least 0.95 that the total premiums will cover the total benefits on both contracts.

Reference no: EM131001695

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