Q: 4,5,6

Chapter 8 Insurance Pricing 159 4) Suppose an insurer estimates that an expo sure has the following loss distribution: S 600,000 with probability 0.0i Loss $100,000 with probability 0.02 S 30,000 with probability 0.03 S 0 with probability 0.94 Claim payments are not expected to be paid until one year after the premium is received. If the interest rate is 5 percent, what is the discounted expected claim cost? 5.) Redo problem 4 assuming a 8 percent inter- est rate. 6.) Redo problem 4 assuming claim payments are not made until two years after the pre- mium is received