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(Solved): Losses in 2013 follow a single-parameter Pareto distribution with parameters =1 and =750. An ins ...



Losses in 2013 follow a single-parameter Pareto distribution with parameters α=1 and θ=750. An insurance coverage on the losses has a policy limit of 1,200. Inflation is expected to increase losses uniformly by 4% per year in 2014, 2015, and 2016. Calculate the ratio of the expected payment size in 2016 to the expected payment size in 2013.



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