Consider an insurance company with a single death insurance liability. A capital C is paid in one year if the policyholder is dead while nothing is paid if he is alive. Let us assume that the death probability of the policyholder at 1 year is 10%. Let us assume that initial assets Ao of the company are invested in an asset At whose future value is modelled according to a lognormal distribution N(ut, o2t). Let us denote L, the initial value of the liabilities. NAV A. Lo Assets Liabilities Compute the economic capital of the company as well as the initial asset value (as function of the other parameters C,u, o, t and Lo) such that the probability of bankruptcy in one year is at most at 5%. Give an intuitive explanation of this capital starting from the case u=0 and considering afterwards the cases u>0 and u0 and u