3.(a)The company that offered this insurance policy insures 900 people with exactly the same

distribution of health losses as that of Maria. Calculate the variability that the insurance company

faces in the average claim per individual insured.

(Hint: use your answer in question 2 part (a)).v

p. Maria believes she faces health costs in the current year of either $5,000 with probability 0.7 or costs of $15,000 with probability 0.3. (a) Find the mean and standard deviation of the costs that Maria faces. 5000*.7 +15000*.3 = expected loss 8000 .7(5000-8000) 2+.3(15000-8000) 2 = 21M sqrt(21M) = 4582.57569496 (b) Give a definition of risk-aversion. Describes the investor who chooses the preservation of capital over the potential for a higher-than-average return