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Alja [10]
3 years ago
14

. There is an 80% probability that Tom will be in good health during the year and incur only $200 in medical expenses, but there

is a 20% probability that he will be ill and incur $20,000 in medical expenses. If an insurance company charged Tom an actuarially fair premium, how much would Tom pay for health insurance
Business
1 answer:
zaharov [31]3 years ago
5 0

Answer:

The  Actuarially Fair Premium that Tom have to pay for hid Health Insurance is $4,160

Explanation:

To compute the amount that Tom have to pay for Health Insurance is;

Actuarially Fair Premium = (Probability of actuality ill × Payments incurred) + (Probability of not actuality ill × Payments incurred)

Actuarially Fair Premium = (20% x $20,000) + (80% x $200)

Actuarially Fair Premium = $4,000 + $160

Actuarially Fair Premium  = $4,160

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Answer:

Total cash receipts              194,760

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We will calculate base on the budget number provided.

We will multiply the month sales revenue by the amount expected to be colelcted on september

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<u>36% from the second month:</u>

36% of July: 211,000        = <u>  75,960  </u>

Total cash receipts              194,760

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