Perform a Sensitivity Analysis on the Optimal Decision and Summarize

question 17

Essay

Perform a sensitivity analysis on the optimal decision and summarize your findings. Vary the probability of being in an accident from 0% to 10%, the insurance premium from $50 to $300, and the deductible amount from $0 to $600. In response to which model inputs is the expected total cost value most sensitive?

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Definitions:

Deposit Today

An action where money is placed into a bank account or investment at the current date.

Investment Return

The profit or loss on an investment over a specified period, represented as a percentage of the investment's initial cost.

Present Values

The worth of a future amount of money today, calculated by discounting future cash flows at a specific interest rate.

Annuities

Savings vehicles that deliver scheduled payouts, commonly utilized for building retirement reserves.