Lydia’s Insurance Company Payout Probabilities
Order ID:89JHGSJE83839 Style:APA/MLA/Harvard/Chicago Pages:5-10 Instructions:
Lydia’s Insurance Company Payout Probabilities
Question Description
- Write separately the probabilities that Lydia’s insurance company will have to:(i) Payout at the end of the first year of a policy.
(ii) Payout at the end of the second year of a policy.
(iii) Not have to pay out a policy at all.
b. Draw a detailed contingent cash flow diagram that models this income protection policy from the perspective of Lydia’s insurance company.
c. Calculate the premium $P that Lydia’s insurance company should charge for this income protection policy.
Lydia works for an insurance company. Her company wishes to provide an income protection policy to employed persons, which will provide the policyholders with a single payout of $10 000 in the event that they become unemployed within the next two years.
The premium $P for this policy would be paid at the beginning of the two-year period, and the payout, if required, would occur at the end of whichever one-year period during the policy that the policyholder became unemployed. Lydia’s insurance company would have to pay administrative costs of $60 at the start of the policy.
The interest rate is j1 = 9%. Suppose government statistics indicate the probability an employed person becomes unemployed within any one-year period is 1%. Further, suppose that Lydia’s insurance company wishes to earn on average a net 0.05P profit per policy (where P is the premium of the policy) as measured at the end of the two years.
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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