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3 years ago

What role does math play in the insurance industry?

Business

1 answer:

Nataly_w [17]3 years ago

3 0

Answer:

The correct answer based on the options given is A)

Explanation:

Actuarial Science is a branch of mathematics predominantly used by the Insurance Industry to create a formula or mathematical model that enables them to charge a profit-oriented rate for a particular risk.

If insurance companies charge arbitrarily, they may overcharge thus leading to a collapse of the system. If they undercharge, the system of pooling risks becomes unsustainable as claim paying capabilities are reduced.

Hence the need to use a mathematical model to ensure that rates give room for the ability of the system to meets it's obligations when they arise and for the companies to make a profit.

The use of models is the reason why sometimes there are hard markets in insurance and at other times there are soft markets.

Cheers!

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During the beginning of the 21st century, the growth in computer sales declined for the first time in almost two decades. As a r

MAXImum [283]

Answer:

Answer for the question:

During the beginning of the 21st century, the growth in computer sales declined for the first time in almost two decades. As a result, PC makers dramatically reduced their orders of computer chips from Intel and other vendors. In general, the environment in which computer manufacturers operate is very uncertain; how should we expect this feature of the market to affect the length of contracts between computer manufacturers and their hardware manufacturers?

is given in the attachment.

Explanation:

4 0

3 years ago

You bought one of Great White Shark Repellant Co.’s 5.8 percent coupon bonds one year ago for $1,030. These bonds make annual pa

defon

Answer:

total rate of return on the Bond = 9.40%

Explanation:

given data

coupon bonds = 5.8%

bonds price = $1,030

maturity time = 14 year

required return on the bonds = 5.1 percent

solution

we know here market price of the bond is Present Value of Coupon Payments + Present face Value

so that face Valueof bond = $1,000

and here annual Coupon Amount will be

annual coupon amount = $1000 × 5.80%

annual coupon amount = $58

and here Market Price of the Bond will be

Market Price of Bond = Present Value of Coupon Payments + Present face Value ......................1

here Present Value of Coupon Payments at PVIFA 5.10% and 14 Years

Present Value Annuity Inflow Factor (PVIFA) = $\frac{1-(1/(1+r)^t}{r}$ ....2

Present Value Annuity Inflow Factor = $\frac{1-(1/(1+0.0510)^14}{0.0510}$

Present Value Annuity Inflow Factor = 9.83566

and

Present Value Inflow Factor (PVIF) 5.10%, 14 Years= $\frac{1}{(1+r)^t}$ ...........3

Present Value Inflow Factor (PVIF) = $\frac{1}{(1+0.0510)^14}$

Present Value Inflow Factor = 0.49838

Market Price of Bond = ( $58 × 9.83566 ) + ( $1,000 × 0.49838 )

Market Price of Bond = $1,068.85

so total rate of return on the Bond will be

total rate of return on the Bond = [ { Annual Coupon Amount + ( Change in Bond Price ) } ÷ Current Price] ...............4

total rate of return on the Bond = $\frac{58+(1068.85-1030)}{1030}$

total rate of return on the Bond = 9.40%

5 0

3 years ago

An insurance company is analyzing the following three bonds, each with five years to maturity, annual interest payments, and is

Andrej [43]

Here's the complete question:

An insurance company is analyzing the following three bonds, each with five years to maturity, and is using duration as its measure of interest rate risk:

a. $10,000 par value, coupon rate = 8%, rb = 0.10

b. $10,000 par value, coupon rate = 10%, rb = 0.10

c. $10,000 par value, coupon rate = 12%, rb = 0.10

What is the duration of each of the three bonds?

a. Duration on 8% coupon bond = 4.28 years

Year 1 ,2,3,4,5

CFs 800,800,800,800,10800

DCFs 727.27, 661.2, 601.05, 546.41 6705.95

PV=9241.84

Duration = <DCFs/PV

(7271+661.22+601.053+546.414+6705.95*5)/9241.84

=39568.1/9241.84

=4.2814

b. Duration on 10% coupon bond = 4.17 yearsc.

c. Duration on 12% coupon bond = 4.07 years

7 0

3 years ago

Read 2 more answers

Which budgetary category changed the most between your old budget and your new budget? Why?

Sunny_sXe [5.5K]

Answer:

The net savings changed the most, and this is because of the extra money coming in via total income. An extra $290.00 was added to the category.

Explanation:

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3 years ago

Gladys learns from her agent Phil that he has just received a full price offer from a minority couple. She tells Phil to pull he

GaryK [48]

Answer:

both Gladys and Phil

Explanation:

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3 years ago