Question
Pet Insurance Limited has just had its Annual General Meeting. It has made several financial decisions but initially needs to firm up on the numbers.
Pet Insurance Limited has just had its Annual General Meeting. It has made several financial decisions but initially needs to firm up on the numbers. Firstly, it has decided it needs to be more socially responsible and wishes to make payments to charity. The company has 3 million surplus funds and it wishes to use this to pay a constant annual amount to the staffs favourite charity, World Wildlife Fund, over the next 15 years. Secondly, Pet Insurance sells health insurance for pets to their owners and wants a clearer idea of the expected cost of treatment per policyholder. Claims made by policyholders are either for minor or major treatment. On average, minor treatment costs the company 2,000 and major treatment costs it 20,000. The probability that a policyholder claims for minor treatment of their pet over the course of a year is 0.07 and the probability for a claim for a major treatment for their pet during a year is 0.03. Pet Insurance Limited assumes that no policyholder makes more than one claim a year for their pet.
Charity Payment What is the formal name for the specific type of regular payment which Pet Insurance Limited proposes to pay to World Wildlife Fund? Calculate the annual amount which Pet Insurance Limited will pay to World Wildlife Fund. Assume the discount rate is 5%.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started