CAS Exam 9 Spring 2015, Question 16
Study guide: Exam 9
The tables below describe the possible outcomes for a company's losses and asset values.
| Losses | Probability |
|---|---|
| $15,000 | 50% |
| $20,000 | 30% |
| $30,000 | 20% |
| Assets | Probability |
|---|---|
| $18,000 | 50% |
| $25,000 | 30% |
| $35,000 | 20% |
Assume the losses and assets are independent.
The company will be changing the investment of its assets so that the assets are invested in risk-free securities that would guarantee an asset value of $19,000.
Determine the additional required capital for the company to maintain the same Expected Policyholder Deficit (EPD) ratio following this investment change.
Part a (2 points)
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