How many contracts should be sold

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Reference no: EM131001626

A failure time T has a uniform distribution on [0,30]. The force of interest is a constant 5%. A single premium insurance contract pays 1 unit at the moment of failure. It is desired to have at least a 95% probability that premiums will cover benefits on a large group of contracts. Answer the following assuming a normal approximation.

(a) Suppose the security loading is 20%. How many contracts should be sold?

(b) It is estimated that 100 contracts will be sold. What should the security loading be?

Reference no: EM131001626

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