Insurance

A homeowner is insured against natural disasters and pays 0.05% of the house value annually. The house is worth 88 EUR.

Calculate the annual insurance premium.

Calculate the probability of a disaster occurring, given that 50% of all insurance premiums collected are paid out as claims.

Final Answer:

d =  176000 eur
p₂ =  0.03 %

Step-by-step explanation:

$$\begin{gathered} r=0.05\%=\frac{0.05}{100}=0.0005 \\ 88=d\cdot r\text{eur} \\ d=\frac{88}{r}=\frac{88}{0.0005}=176000\text{eur} \end{gathered}$$

$p_2=r\cdot 50=0.0005\cdot 50=0.03\%$

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