. An insurance company offer contracts for a certain peril. In a contract period, which is 6 months, the following payoffs can o
ccur: payoff Prob. Of loss 15000 0.015 12000 0.023 8000 0.028 6000 0.035 Find the average payoff per contract in a contract period. If the company has to cover its operating cost which is a 12% overhead and make a 4% profit what should be the yearly premium which must charge for each contract? What is the probability that a contract will incur losses not exceeding $9,200 during a contract period?
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