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1. An insurer sells a very large number of policies to people with the following loss distribution: $100,000 with probability 0.005 $ 60,000 with probability

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1. An insurer sells a very large number of policies to people with the following loss distribution: $100,000 with probability 0.005 $ 60,000 with probability 0.010 Loss = $20,000 with probability 0.020 $10,000 with probability 0.05 $ 0 with probability 0.915 a. Calculate the expected claim cost per policy. b. Assume claims are paid one year after premiums are received and that the in- terest rate is 6 percent. Calculate the dis- counted expected claim cost per policy. c. Assume that the only administrative cost is the cost of processing an application, which equals $100 per policy, and that the fair profit loading is $50. Who is the fair premium

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