PLEASE HELP WITHIN 10 MINUTES! NEED ANSWERS ASAP. FOR RISK INSURANCE AND MANAGEMENT CLASS.

Person A faces an 80% chance of having no loss and a 20% chance of having a loss of $50.

Person B faces an 80% chance of having no loss and a 20% chance of having a loss of $50.

Person C faces an 80% chance of having no loss and a 20% chance of having a loss of $100.

QUESTION 1: Suppose Person A purchases full insurance for an actuarially fair premium (AFP) and Person A is the ONLY person in the insurer's risk pool.

a) What is the AFP of full insurance for Person A?

b) What is the amount of risk the insurer faces?

QUESTION 2: Supposed that Person B also purchases full insurance for an AFP and joins Person A in the insurer's risk pool.

Note that the risk pool now contains Person A and Person B only.

a. What premium would be required to charge each Person A and Person B if the insurer wanted to break-even?

b. What is the amount of risk the insurer faces?

c. Compare your results for 2(b) to 1(b). Explain how/why this occurs.

d. In this case, what types of income or wealth transfer is (are) illustrated here?

QUESTION 3: Suppose that Person C also purchases full insurance and joins Person A in the insurer's risk pool.

Note that the risk pool now contains Person A and Person C only. Since they are in the same risk pool, the insurer will charge Person A and Person C the SAME PREMIUM.

Both Person A and Person C have a worry value for retention equal to $6

a. What premium would be required to charge each Person A and Person C if the insurer wants to break-even?

b. Will Person A purchase full insurance for the break-even premium? Why or why not?

c. Will Person C purchase full insurance for the new break-even premium? why or why not?