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Possible damage ($) Probability 0 .55 500 .20 1,200 0.15 7,000 0.07 15,000 0.03 Suppose you wish to insure against a loss of greater than

Possible damage ($) Probability

0 .55

500 .20

1,200 0.15

7,000 0.07

15,000 0.03

Suppose you wish to insure against a loss of greater than $500.

What is the actuarially fair value for this loss exposure?

If the premium loading is 35%, what premium would you expect to pay?

What is the likelihood you will file a claim?

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