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Jeighborhood Insurance sells fire insurance policies to local homeowners. The premium is $260, the probability of a fire is 0.1%, and in he event of a fire, the insured damages (the payout on the policy) will be $250,000. lequired: - Make a table of the two possible payouts on each policy with the probability of each. (Negative answers should be indicated with a ninus sign.) Answer is complete and correct. . Suppose you own the entire firm, and the company issues only one policy. What are the expected value, variance, and standard leviation of your profit? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) - Now suppose your company issues two policies. The risk of fire is independent across the two policies. Make a table of the three ossible payouts along with their associated probabilities. (Negative answers should be indicated with a minus sign. Round your Probability" answers to 4 decimal places.) - What are the expected value, variance, and standard deviation of your profit? (Do not round intermediate calculations. Round your tandard deviation to the nearest whole number.) e. Compare your answers to (b) and (d). Did risk pooling increase or decrease the variance of your profit? f. Continue to assume the company has issued two policies, but now assume you take on a partner, so that you each own one-half of the firm. Make a table of your share of the possible payouts the company may have to make on the two policies, along with their associated probabilities. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) f. Continue to assume the company has issued two policies, but now assume you take on a partner, so that you each own one-half of the firm. Make a table of your share of the possible payouts the company may have to make on the two policies, along with their associated probabilities. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) g. What are the expected value and variance of your profit? 32.16.) Problem 6-38 Growing Annuity [LO1] Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $53,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next year. You have decided that one year from today you will begin depositing 10 percent of your annual salary in an account that will earn 9.3 percent per year. Your salary will increase at 2 percent per year throughout your career. How much money will you have on the date of your retirement 35 years from today? (Do hot round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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