Suppose There Are Two Types of People in an Insurance

question 4

Essay

Suppose there are two types of people in an insurance market: high and low risks.The high-risk person is sick 10% of the time and the low-risk person is sick 5% of the time.The probability of any individual being high risk is 40%.Upon getting sick,an individual loses $10,000 in medical expenses.If the insurer cannot distinguish between the two types,but the two individuals know their types,what will be the equilibrium premium?

Apply recording transactions under both perpetual and periodic inventory systems.

Comprehend the process of recording sales returns, purchase returns, and related adjustments in inventory accounting.

Describe the characteristics and application of perpetual and periodic inventory systems.

Identify the impact of freight charges on inventory cost under different inventory systems.

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Definitions:

Investment Superstars

Individuals or entities that have achieved exceptional returns on their investment portfolios, often significantly outperforming market benchmarks.

Warren Buffet

An American investor, business tycoon, and philanthropist, known for his value investing philosophy and as the chairman of Berkshire Hathaway.

Peter Lynch

Peter Lynch is a renowned American investor and former fund manager who popularized the investment strategy of "invest in what you know," emphasizing investing in familiar companies.

Abnormal Return

The difference between the actual return of a security and the expected return based on risk and market movement.