Find the correct statement(s) about deductibles?

The lower the deductible the lower the cost of insurance.

Deductibles can help make policyholders more loss conscious.

Increasing the deductible tilts the balance in the risk retention/risk transfer trade-off towards the firm/individual who is transferring risk.

1 and 2

2 only

3 only

2 and 3

All three are true.

The University of Iowa has a fleet of 60 similar vehicles each worth $20,000 and wants to set a deductible so that they retain no more than $1,500 per year in collision damages at a safety level of 95%. Long-term statistics suggest an average number of 2 crashes per year and an expected loss of $750 per crash. Based on the Poisson distribution, UIs risk manager obtains the following table:

Losses	Prob.	Cum.
0	13.5%	13.53%
1	27.1%	40.60%
2	27.1%	67.67%
3	18.0%	85.71%
4	9.0%	94.73%
5	3.6%	98.34%
6	1.2%	99.55%
7	0.3%	99.89%
8	0.1%	99.98%
9	0.0%	100.00%

The deductible should be set to $375.

The deductible should be set to $250.

The deductible should be set to $300.

The Poisson distribution is not applicable in this situation.

(Carried over from Question 2 table...) What about with a safety level of 99%?

The Poisson distribution is not applicable in this situation.

The deductible should be set to $250.

The deductible should be set to $300.

The deductible should be set to $375.

Which of the following conditions would imply self-insurance may be applicable?

All of these conditions

Strong financial condition

Firm management able and willing to administer and manage a fund

Objects are similar to one another

Sufficient number of objects with low correlation among each other

ABC Company in considering a loss control investment. The project will cost $100,000. It will generate an after-tax net cash flow of $60,000 one year after investment and an after-tax net cash flow of $60,000 two years after investment. Assume a constant 6 percent interest rate. Assuming a discount rate of 6 percent, what is the net present value (NPV) of this project?

Correct answer is not here.

$12,460

$10,004

$15,664

$13,208