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a . If the simple loss ratio on a line of property insurance is 7 3 % , the loss adjustment expense is 1 2

a. If the simple loss ratio on a line of property insurance is 73%, the loss adjustment expense
is 12.5%, and the ratio of commissions and other acquisitions expenses is 18%, is this line
profitable?
b. How does your answer to part (a) change if investment yields of 8% are added?

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