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PRINCIPLES OF INSURANCE-Lecture-1201 - 1

Dashboard My courses PRINCIPLES OF INSURANCE-Lecture-1201 - 1 Project Project

Project

This homework accounts for 10% of your overall grade. Work should be done within groups of

two to three students. Similar submissions will both get a mark of zero.

The homework should be in an Excel form and submitted via ITC; the filename format should

include your names like this Sarah_Alsaed__Mira_Alsaed.xlsx No other forms would be

accepted.

Submission is due at 3:00 pm on the 7th December 2020.

Assume that three restaurant owners have decided to pool their losses together; each owns an identical

restaurant valued at $600,000. Suppose that there is a 4% chance in any year each restaurant will catch

fire. The loss to any of the restaurants is an independent event. Assuming that:

Fire events are independent of each other

Each restaurant faces the same types of risks and environmental conditions.

Given that, Answer the following questions:

A. Use the compound probability of independent events law to find the sample space of the probability

of each possible event

B. Find the expected annual loss for each of the insureds.

C. Find the risk of incurrence of losses (Std dev)

D. Explain what happens to the objective risk with the addition of more individuals