1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
natka813 [3]
2 years ago
10

Suppose people cannot tell for sure whether they will fall ill in any given year. High-risk people correctly perceive their chan

ce of falling ill in a year is 30 percent, and low-risk people correctly perceive that their chance of falling ill is 10 percent. Both high-risk and low-risk people have to pay $10,000 in medical expenses if they fall ill, and nothing if they remain healthy.a. What are the expected annual medical expenses of a high-risk person?$ per yearb. What are the expected annual medical expenses of a low-risk person?$ per yearc. Suppose insurance companies cannot tell whether someone is high-risk or low-risk. They only know that half of all people are high-risk, and half of all people are low-risk. So, they offer a health insurance policy that costs $2,000 per year in exchange for covering all of a person's medical expenses should they fall ill. If high-risk people, and low-risk people are risk-neutral, then who will purchase this insurance policy? Will the insurance company be able to stay in business if it continues to charge $2,000 per year? Briefly explain.(Click to select) Only low-risk people or Neither high-risk nor low-risk people or Only high-risk people or Both high-risk and low-risk people will want to purchase the insurance policy.The insurance company (Click to select) will not or will be able to stay in business because on average the company will (Click to select) break even or pay less to each customer than the revenue it receives from each customer or pay more to each customer than the revenue it receives from each customer .
Business
1 answer:
Crank2 years ago
5 0

The expected annual medical expenses of a high-risk person is $3000 per year while that of a low-risk person is $1000 per year.

The expected annual medical expenses of a high-risk person will be calculated as:

= Probability of falling ill × Expenses in case of illness

= 30% × $10000

= 0.3 × $10000

= $3000

The expected annual medical expenses of a low-risk person will be calculated as:

= Probability of falling ill × Expenses in case of illness

= 10% × $10000

= 0.1 × $10000

= $1000

It should be noted that in a situation where the individuals are risk neutral, the low-risk persons will not buy insurance as only the high-risk individuals will be expected to buy<em> insurance.</em>

Read related link on:

brainly.com/question/25405387

You might be interested in
Which of the following statements is not true concerning Peter Jackson's use of computer-generated imagery in The Lord of the Ri
Sonbull [250]

Answer:

c

Explanation:

I believe its C due to the fact. stunt doubles are actual individuals. or they would just have the actor be edited instead of placing a digital stunt double.

6 0
2 years ago
Juan Alcobar is junior sales representative for a large equipment manufacturer. Sarah Gittins, a senior sales representative, ha
ipn [44]

Answer:

C. A proposal of products that will solve the prospect's problems.

Explanation:

With regards to the above scenario, both Joan and Sarah put together a proposal of products that will solve the project's problems by critically analyzing the needs of the huge new prospect and providing various options.

Here, both staff knew the need of the prospect hence are able to come up with necessary questions and various solutions that would address the needs.

In addressing a need, various alternatives to providing solution to that need must be made available which is what was provided to the huge new client.

7 0
3 years ago
Fama’s Llamas has a weighted average cost of capital of 10.9 percent. The company’s cost of equity is 12 percent, and its pretax
mojhsa [17]

Answer:

0.2

Explanation:

The weighted average cost of capital (WACC) is calculated as below:

WACC = (D/A) x r_D x (1-t) + (E/A) x r_E , where:

A: Market value of company asset;

D: Market value of company debt;

E: Market value of company equity;

r_D: pre-tax cost of debt;

r_E: cost of equity;

t: tax rate

Rearrange above formula a bit, we get:

WACC = (D/A) x r_D x (1-t) + (1 - D/A) x r_E

Putting all the numbers together, we have:

10.9% = (D/A) x 8.9% x (1 - 38%) + (1 - D/A) x 12%

Solve the equation, we get D/A = 17% or D/E = 0.2

So, target debt−equity ratio is 0.2

4 0
3 years ago
sales forecasts . multiple select question. should not be used for audit decisions help auditors understand management's strateg
Anna [14]

Sales forecasts <u>help auditors understand </u><u>management's strategy</u>

<u>can be used in valuing </u><u>inventory</u>

<u />

What are sales forecasts?

A sales forecast is an indication of predicted sales revenue. What your business expects to sell during a specific time period is estimated by a sales forecast (like a quarter or year). The most accurate sales projections do this. By providing knowledge of the probable behavior of your most valued clients, sales forecasting aids in achieving this revenue efficiency. In addition to enhancing pricing, advertising, and product development, you may forecast future sales. The ability of your business to predict future revenues across particular time periods in order to better manage resources is one of the benefits of sales forecasting.

To learn more about sales forecast click on the given link:

brainly.com/question/29110387

#SPJ1

4 0
1 year ago
the cost of an automobile is $9,000 and after a period of three years it will have an estimated salvage value of $5,200. a down
Kisachek [45]

Salvage fee is the expected book fee of an asset after depreciation is complete, primarily based totally on what a corporation expects to get hold of in alternate for the asset on the quit of its beneficial life.

The required details for  salvage value in given paragraph

Value of Factors given in query are wrong, accurate values are given below

(P/F,1%,36) = zero.698925

(A/P,1%,36) = zero.033214

Loan amount = 9000 -1000 = 8000

Present really well worth of salvage fee = 5200*(P/F,1%,36) = 5200 * zero.698925 = 3634.41

Required mortgage to be repaid over three yrs = 8000 - 3634.41 = 4365.59

Monthly payment = 4365.59 * (A/P,1%,36) = 4365.59 * zero.033214 = 144.9987 ~ 145.

An expected salvage fee may be decided for any asset that a corporation can be depreciating on its books over time. Every corporation may have its very own requirements for estimating salvage fee. Some agencies might also additionally select to constantly depreciate an asset to $zero due to the fact its salvage fee is so minimal. It is primarily based totally at the fee a corporation expects to get hold of from the sale of the asset on the quit of its beneficial life.

In a few cases, salvage fee might also additionally simply be a fee the corporation believes it is able to achieve with the aid of using promoting a depreciated, inoperable asset for parts.

To know about salvage value click here

brainly.com/question/28344861

#SPJ4

6 0
1 year ago
Other questions:
  • Which amendment to the U.S. Constitution provides the protection of due process of law and protection from having to testify aga
    14·1 answer
  • You borrow $210,000 to purchase a home. the terms of the loan call for monthly payments over 30 years at a mortgage rate of 4.50
    9·1 answer
  • Pursuant to the​ video, if the news reporter had challenged the reasonableness of her detention by the Coach​ store, Coach could
    6·1 answer
  • Cooley Landscaping Company needs to borrow ​$21 comma 000for a new​ front-end dirt loader. The bank is willing to loan the funds
    15·1 answer
  • You paid $10,000 for an investment that promises to pay $750 at the end of each of the next 5 years, then an additional lump sum
    6·1 answer
  • You expect to receive a payment of $600 one year from now. Answer the following questions and show your calculations:
    14·1 answer
  • On January 2, Year 3, Lake Mining Co.’s board of directors declared a cash dividend of $400,000 to shareholders of record on Jan
    11·1 answer
  • The aftertax cost of debt:
    12·1 answer
  • Masks Inc. is a cosmetics company that makes beauty products. It uses whale oil from dead whales only and does not kill whales t
    7·1 answer
  • The government should extend the duration of unemployment benefits to those workers who lost their jobs due to outsourcing. This
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!