FUNDAMENTALS OF CORPORATE FINANCE
10th Edition
ISBN: 9781260013962
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 12, Problem 1QP
Summary Introduction
To discuss: The reason why insurance firms charge coastal inhabitants a premium that replicate the actuarial probability of harm from storms hurricanes and otherhurricanes.
Expert Solution & Answer
Explanation of Solution
The insurance firm is pleased to charge a premium that replicate actuarial chances of death deprived of an extra risk premium. In difference, harmof flood is not self-governing across policyholders. When my seasidehomebased floods in a storm,there is a moreprobability that my neighbour’s will also. Since risk of flood is notdiversifiable, the insurance firmmight not be pleased with imposing a premium thatreplicates only the anticipated value of pay-outs.
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Chapter 12 Solutions
FUNDAMENTALS OF CORPORATE FINANCE
Ch. 12 - Prob. 1QPCh. 12 - Prob. 2QPCh. 12 - Prob. 3QPCh. 12 - Prob. 4QPCh. 12 - Prob. 7QPCh. 12 - Prob. 8QPCh. 12 - Prob. 9QPCh. 12 - Prob. 10QPCh. 12 - Prob. 11QPCh. 12 - Prob. 12QP
Ch. 12 - Prob. 14QPCh. 12 - Prob. 15QPCh. 12 - Prob. 16QPCh. 12 - Prob. 17QPCh. 12 - Prob. 18QPCh. 12 - Prob. 19QPCh. 12 - Prob. 20QPCh. 12 - Prob. 21QPCh. 12 - Prob. 22QPCh. 12 - Prob. 23QPCh. 12 - Prob. 24QPCh. 12 - Prob. 25QPCh. 12 - Prob. 26QPCh. 12 - Prob. 27QPCh. 12 - Prob. 28QPCh. 12 - Prob. 29QPCh. 12 - Prob. 30QPCh. 12 - Prob. 31QPCh. 12 - Prob. 32QPCh. 12 - Prob. 33QPCh. 12 - Prob. 34QP
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