Calculate fz for all nonnegative values of z

Reference no: EM131001554

1. A failure time T is uniformly distributed on the interval [0, 20]. The force of interest is a constant 0.05.

(a) A deferred insurance contract provides for a payment of 1 at the moment of failure provided that this occurs after time 5. If Z‾ is the present value of the benefits, find the 80^th percentile of Z‾. That is, find the point z such that P(Z‾ ≤ z) = 0.80.

(b) Find the 80^th percentile of Z‾ when the contract is a term insurance policy that pays 1 unit if failure occurs in the first 5 years.

2. Consider a deferred term insurance contract. It provides for 1 unit payable at the moment of failure provided that this occurs between N and 2N years from now. Nothing is paid if failure occurs in the first N years or after 2N years. You are given that the force of failure μ and the force of interest δ are constants such that μ = δ/2. Moreover, you are given that e^-Nδ = 0.36. If Z is the present value of the benefits, calculate FZ (z) for all nonnegative values of z.

Reference no: EM131001554

Questions Cloud

Obtaining independent parameter estimates : Had the model parameters not been given, so that their values must be determined from the data, repeat the test in (i) and compare the results. What does this imply about the importance of obtaining independent parameter estimates before carrying ..

When is it permissible to record bad debt expense : When is it permissible to record bad debt expense only at the time when receivables actually prove uncollectible?

Define the term culture jamming : Define the term "Culture Jamming". Visit Adbusters (http://www.adbusters.org/), and share your impressions of the website. Then, explain how advertising can act as a form of cultural imperialism

Explain the primary functions of internal controls procedure : Explain the primary functions of internal controls procedures in the accounting area. What is meant by separation of duties?

Calculate fz for all nonnegative values of z : Moreover, you are given that e-Nδ = 0.36. If Z is the present value of the benefits, calculate FZ (z) for all nonnegative values of z.

Some set of assumptions about human behavior : Human motivation that we've discussed up to this point is grounded (explicitly or implicitly) in some set of assumptions about human behavior. Pick one motivational theory that you find "suspect", and write a 4-5 page (not including references or exh..

Should holders of trade secrets be allowed to have : Should holders of trade secrets be allowed to have this exclusive right forever? Why, or why not? How does society benefit from allowing for these "never ending" exclusive righ

The effects of cultural diversity in virtual teams : Need an answer to this with reference to/using information from the attached file.(Staples, D. S., & Zhao, L. (2006). The effects of cultural diversity in virtual teams versus face-to-face teams. Group Decision and Negotiation, 15(4), 389-406.) and (..

What are the responsibilities of the company auditor : What are the responsibilities of management described in Section 404 of the Sarbanes-Oxley Act? What are the responsibilities of the company's auditor?

User Account

All Pages