(b) As a risk consultant, Salman Khan has been appointed to study worker claim due to accident at workplace faced by two semiconductor manufacturing companies located in Gurun, Kedah and Larkin, Johor. The following are information for workers' claims at both workplaces: Probability 0.15 0.27 0.58 Gurun RMO RM6,987.92 RM7,009.87 Larkin RM5,741.87 RM6,078.27 RM6,890.23 Additional information: (1) All claim payments will be made at the end of year four for Gurun and six years for Larkin. (ii) Marketing expenses are 11.4 percent of the expected claim cost. (iii) Loss adjustment expenses for Gurun and Larkin are 24 percent and 26.6 percent of the expected claim cost respectively. (iv) Premium taxes cost are 8.75 percent of pure premium for Gurun and 6.75 percent for Larkin. (v) Administrative expenses are 29.6 percent of pure premium. (vi) Underwriting costs for Gurun and Larkin are 23.3 percent and 19.6 percent of pure premium respectively. (vii) Profit loading is 5.5 percent of pure premium. (viii) Cost of claim processing is RM23,850 for Gurun and RM28,675 for Larkin. (ix) The risk premium for Gurun and Larkin are 3.8 percent and 2.8 percent respectively and risk-free rate is 6.2 percent for both semiconductors. Based on the information above, calculate the fair premium for each semiconductor. (11 marks) (b) As a risk consultant, Salman Khan has been appointed to study worker claim due to accident at workplace faced by two semiconductor manufacturing companies located in Gurun, Kedah and Larkin, Johor. The following are information for workers' claims at both workplaces: Probability 0.15 0.27 0.58 Gurun RMO RM6,987.92 RM7,009.87 Larkin RM5,741.87 RM6,078.27 RM6,890.23 Additional information: (1) All claim payments will be made at the end of year four for Gurun and six years for Larkin. (ii) Marketing expenses are 11.4 percent of the expected claim cost. (iii) Loss adjustment expenses for Gurun and Larkin are 24 percent and 26.6 percent of the expected claim cost respectively. (iv) Premium taxes cost are 8.75 percent of pure premium for Gurun and 6.75 percent for Larkin. (v) Administrative expenses are 29.6 percent of pure premium. (vi) Underwriting costs for Gurun and Larkin are 23.3 percent and 19.6 percent of pure premium respectively. (vii) Profit loading is 5.5 percent of pure premium. (viii) Cost of claim processing is RM23,850 for Gurun and RM28,675 for Larkin. (ix) The risk premium for Gurun and Larkin are 3.8 percent and 2.8 percent respectively and risk-free rate is 6.2 percent for both semiconductors. Based on the information above, calculate the fair premium for each semiconductor. (11 marks)
