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b) Suppose that you have a job paying Gh100,000 per year. With a 5% probability, next year your wage will be reduced to Gh40,000 for
b) Suppose that you have a job paying Gh100,000 per year. With a 5% probability, next year your wage will be reduced to Gh40,000 for the year. required i) What is your expected income next year? [7 marks] ii) Suppose that you could insure yourself against the risk of reduced consumption next year. Determine the actuarially fair insurance premium [4 marks]
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