Question
In: Operations Management
Consider an auto insurance policy that for a period of five years would guarantee annual renewal...
Consider an auto insurance policy that for a period of five years would guarantee annual renewal to the policyholder at the same premium rate the insurer charges to drivers that have not had accidents or tickets. In other words, the contract would guarantee the policyholder against rate increases that otherwise would occur from a poor driving record. Do you think that people would be willing to pay enough for this contract to allow the insurer to cover expected costs over the life of the contract? Explain.
Solutions
Expert Solution
There will be a very heavy insurance price which has to be paid by the individuals to have this type of guaranteed renewable policy due to the adverse effect involved in it and thus a regular premium has to be paid by the insured individual as per his or her driving behavior.
The majority of individuals will like to go for the policy which facilitated improved incentives for safety and security and have the lower values of the premiums to be paid.
keosha answered 2 years agoRelated Solutions
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duration of each of the three bonds? a) $10,000 par value, coupon
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An insurance company is analyzing the following three bonds, each with five years to maturity, annual...
An insurance company is analyzing the following three bonds,
each with five years to maturity, annual coupon payments, and
duration as the measure of interest rate risk. What is the duration
of each of the three bonds? (Do not round intermediate
calculations. Round your answers to 2 decimal places. (e.g.,
32.16)) Duration of the Bond a. $10,000 par value, coupon rate =
8.8%, rb = 0.18 years b. $10,000 par value, coupon rate = 10.8%, rb
= 0.18 c. $10,000...
An insurance company is analyzing the following three bonds, each with five years to maturity, annual...
An insurance company is analyzing the following three bonds,
each with five years to maturity, annual coupon payments, and
duration as the measure of interest rate risk.
What is the duration of each of the three bonds? (Do not
round intermediate calculations. Round your answers to 2 decimal
places. (e.g., 32.16))
Duration of
the Bond
a.
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c....
An insurance company is analyzing the following three bonds, each with five years to maturity, annual...
An insurance company is analyzing the following three bonds,
each with five years to maturity, annual coupon payments, and
duration as the measure of interest rate risk.
What is the duration of each of the three bonds? (Do not
round intermediate calculations. Round your answers to 2 decimal
places. (e.g., 32.16))
Duration of
the Bond
a.
$10,000 par value,
coupon rate = 8.4%, rb = 0.14
years
b.
$10,000 par value,
coupon rate = 10.4%, rb = 0.14
c....
An insurance company is analyzing the following three bonds, each with five years to maturity, annual...
An insurance company is analyzing the following three bonds,
each with five years to maturity, annual interest payments, and is
using duration as the measure of interest rate risk.
What is the duration of each of the three bonds? (Do not
round intermediate calculations. Round your answers to 2 decimal
places. (e.g., 32.16))
Duration of the bond
a.$10,000 par value, coupon rate = 9.5%, rb = 0.15years
b.$10,000 par value, coupon rate = 11.5%, rb = 0.15
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An insurance company is analyzing the following three bonds, each with five years to maturity, annual...
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each with five years to maturity, annual coupon payments, and
duration as the measure of interest rate risk.
What is the duration of each of the three bonds? (Do not
round intermediate calculations. Round your answers to 2 decimal
places. (e.g., 32.16))
Duration of the Bond
a.
$10,000 par value, coupon rate = 9.5%,
rb = 0.15
years
b.
$10,000 par value, coupon rate = 11.5%,
rb = 0.15
c....
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