Question
Pooling has been used for a long time by businesses as a way to reduce risk. Imagine that years ago a small paint factory employed
Pooling has been used for a long time by businesses as a way to reduce risk. Imagine that years ago a small paint factory employed 200 people, each with an annual salary of $600/year. The factory owner knew from experience that 4 percent of workers were being injured each year, becoming unable to work. The factory owner decided to set up a fund to pay injured workers three months of salary to help their families and build good will with employees. The owner did not contribute to the injury fund. The workers themselves contributed a fixed amount each year to fund the plan. Answer the following questions (1 point each):
How much did the owner need to collect from employees in total to fully fund the plan each year?
How much did each employee have to contribute each year to fully fund the plan?
What percentage of salary did each employee contribute to have an injury fund like this?
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