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Consider two types of home insurance: theft insurance and carthquake insurance. Each year there is a 1% chance that the home will be robbed
Consider two types of home insurance: theft insurance and carthquake insurance. Each year there is a 1% chance that the home will be robbed and a 1% chance that the home will be damaged by an earthquake. Suppose an insurance company writes 100,000 policies of cach type for homeowners. The risk of earthquake is a type of common risk, while the risk of theft is independent across bouseholds. At the beginning of the year, the homeowner expects 1% chance of placing a claim for either type of insurance. However, at the end of the year, the homeowner will have either filled a claim (100%) or not (0). The standard deviation (expressed in percentage terms) of the claim for an individual homeowner in case of earthquake is bype your answer. The standard deviation (expressed in percentage terms) of the claim for an individual homeowner in case of theft is type your answer. The standard deviation (expressed in percentage terms) of the percentage of claims for the insurance company in case of earthquake is type your answer. The standard deviation (expressed in percentage terms) of the percentage of claims for the insurance company in case of theft is type your answer.
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