Question
1. Suppose that Kate and Anne enter into a pooling arrangement. Assume that both women have the following loss distributions and that losses are
1. Suppose that Kate and Anne enter into a pooling arrangement. Assume that both women have the following loss distributions and that losses are independent. Loss $50,000 with probability 0.005 = $20,000 with probability 0.01 $10,000 with probability 0.02 $0 with probability 0.965 (a) Write out the possible outcomes and the probability of each outcome for Kate and Anne after they enter into a pooling arrangement. That is, write out the probability distribution for each of the women after they enter into a pooling arrangement.
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