Question

6. A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The indemnity is...

7. A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The premium is...

8. A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The liability is...

9. A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The premium rate is...

Answer #1

Sol. (6) $150,000 - Indemnity is the amount which the insured person received from the insurance company, in the given case it is $150,000.

(7) $100,000 - Premiun is the amount paid by the insured person to the insurance company, in the given case it is $100,000.

(8) $200,00 - Liability is the maximum amount payable by the insurance company to the insured or we can say the insurance coverage amount, in the given case it is $200,000

(9) $0.5 - Premium rate is the amount payable for every 1$ of insurance coverage, in the given case it is $100000/$200000.

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Larry paid $630,720 for the annuity. Larry is in good health, and
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) Dan Partridge is a risk averter who tries to maximize
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Looking for answers with working.
12.12 (0) Dan Partridge is a risk averter who tries to maximize
the expected value of ?c, where c is his wealth. Dan has $50,000 in
safe assets and he also owns a house that is located in an area
where there are lots of forest fires. If his house burns down, the
remains of his house and the lot it is built on would be worth only
$40,000, giving him a total wealth of...

Larry purchased an annuity from an insurance company that promises
to pay him $6,000 per month for the rest of his life. Larry paid
$630,720 for the annuity. Larry is in good health and is 72 years
old. Larry received the first annuity payment of $6,000 this month.
Use the expected number of payments in Exhibit 5-1 for this
problem.
EXHIBIT 5-1 Table for Expected Return Multiple for
Ordinary Single-Life Annuity
Age at Annuity Starting Date
Expected Return Multiple
68...

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This test (like...

Scott E. Miller, CPA, CVA has given an example of an expert
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Research Memorandum #1
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