Now, another insurance company B offers disability insurance for the next 10 years. The contract is described as follows: there is a 10% probability that Anderson will have an accident that will call for$50,000. A and B decide to pool together and each agrees to pay 2/3 and 1/3 of any loss that might occur. In addition A and B are independent. Anderson decided to get the new disability insurance.

1. How much is this new contract expected to cost to the insurance company if the interest rate is 5%.
2. Without taking into account the time value of money, compute the expected to cost and risk of the contract.
3. Now suppose that there is equal probability that you will get injured in any of the next 10 years. Taking into account the time value of money, find the expected cost and the risk of this contract.