An automobile owner has 40% chance of having exactly one accident in a year and 60% chance of having no accidents in a year. There is no chance that the automobile owner incurs more than one accident in a year.
If there is an accident, the loss amount has the following distribution:
Loss amount & Prob
30 0.3
60 0.15
100 0.45
180 0.1
Suppose there is an ordinary deductible of $40 and the maximum payment by the insurer is $130.
Determine the standard deviation of the payment made by the insurer to the automobile owner.
Answer:
The answer is 32.437
Explanation:
Let X be the loss and let Y be the payment by the insurer.
Hence, we have Y = o if x<= 40,
x-40 if 40 < x < 130
130 if x > = 170
Therefore, Var (y) = E (y^2) - [E(y)]^2
E(y) = 0.4[130 (0.1)+60 (0.45) +20 (0.15)] = 17.2
E(^2) = 0.4 [130^2(0.1) + 60^2(0.45) +20^2(0.15)] = 1348
Finally, Var(y) = 1348 -17.2^2 = 1052.16
Sqrt(1052.16) = 32.437
Therefore, the standard deviation of the payment made by the insurer to the automobile owner is 32.437
Answer:
CAPM= RF+ B(RM-RF)= Required return
3+1.1(12)=16.2% is the required return according to the CAPM method
The stock is expected to return 16.2% in the form of price appreciation and dividends. In this case the dividends are expected to be 2$ and 2/69=2.89 %.
So we know that out of the 16.2 % expected return 2.89% will come from dividends and the rest by increase in stocks price, so in order to find the increase in stocks price we subtract 2.89% from 16.2% and we get 13.31%.
So the stocks price is expected to increase by 13.31%
1.1331*69= 78.18
The investors expected the stocks price to be $78.18 at the end of the year
Explanation:
Net income = $125,000
Interest expense = $30,000
Tax expense = $40,000
Interest times hart corporation earned
for the year = ?
First add all the expenses and then
divided by interest expense to get interest times.
= ($125,000 + $30,000 + $40,000) /
$30,000
= $195,000 / $30,000
<span>= 6.5 </span>
Answer:
business model is not a factor
Explanation: