Reference no: EM132324864

You have the following information on ten individuals, A-J

Individual Wealth pr(SICK) Cost of being Sick

A $150,000 0.05 $20,000

B $70,000 0.10 $15,000

C $80,000 0.15 $25,000

D $100,000 0.20 $10,000

E $250,000 0.25 $30,000

F $50,000 0.30 $5,000

G $25,000 0.35 $10,000

H $130,000 0.40 $20,000

I $40,000 0.45 $15,000

J $120,000 0.50 $15,000

Each individual has the same utility function as given in the text: U = W0.5.

For each individual, calculate:

a. The actuarially fair premium.

b. The loading factor if the insurance company charged a premium that would give the individual the same level of expected utility without insurance.