Scenario 1 (Part 2): Suppose that you are working for an in…
Scenario 1 (Part 2): Suppose that you are working for an insurance company that is attempting to set the price for industrial accident coverage. Firm A has a 12% chance of having an accident, in which case it will incur a loss of $500,000 in damages. Firm B has a 10% chance of having an accident in which it will incur $500,000 worth of damages. Firm A is willing to pay $4000 more than its expected damages for insurance covering the risk. Firm B is even more risk averse, and is willing to pay $6000 over its expected damages to acquire coverage for the risk. The insurance company knows these numbers, but cannot tell which firm is which type. Now consider where the insurance company would price the policy if they wanted to increase the premium. Find the expected profit at this higher price. Comparing this result to the result from the previous question, what is the optimal price for the insurance company to charge for this policy? (Please submit any work for this problem after the exam)
Read Details10 (6 pts). Six yellow balls numbered 1, 2, 3, 4, 5, and 6 a…
10 (6 pts). Six yellow balls numbered 1, 2, 3, 4, 5, and 6 and five blue balls numbered 1, 2, 3, 4, and 5 are placed in an urn. If one ball is chosen at random (a) what is the probability that it is numbered 5 or 6? (b) what is the probability that it is numbered 2, or it is yellow? 11 (6 pts). How many five-letter “words” can be formed from a standard 26-letter alphabet (a) if repetition is allowed? (b) if repetition is not allowed? 12 (6 pts). How many passwords have the form of six symbols that begin with three letters followed by three digits (a) if repetition is allowed? (b) if repetition is not allowed? (Note: The letters are from a standard 26-letter alphabet and the digits are from 0-9.)
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