An Insurance Company Derives Its Revenues from Its Three Primary $\quad \underline { 2005 \text { Revenues } } \quad \underline { 2006 \text { Growth Rates } }$

question 24

Essay

An insurance company derives its revenues from its three primary business units: home insurance,auto insurance,and life insurance.The revenues for the year ending 2005,along with the potential growth rates per business unit for 2006 are illustrated below.
Business Unit $\quad \underline { 2005 \text { Revenues } } \quad \underline { 2006 \text { Growth Rates } }$
Home Insurance $\quad \$ 500,000 \quad$ Normal; $\mu = 7 \% , \sigma = 2 \%$
Auto Insurance $\quad \$ 450,000 \quad$ Triangular, $\min = 2 \% , \max = 6 \%$ ,
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ most probable $= 4 \%$
Life Insurance $\quad \$ 550,000 \quad$ Uniform, min $= 4 \% , \max = 10 \%$
a.Use Crystal Ball to simulate total revenues for 2006.Run 1000 replications of the model to find the average revenues.
b.What is the probability that 2006 revenues will exceed $1.6 million?

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Definitions:

Regal Marine

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The duration it takes from conceptualizing a product until its introduction into the market.

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