2015 Spring #25 10-10 rule
Shouldn't it be (0.6*100/1.03^1.5-20)/20 to calculate probability of loss? Why hasn't the loss been discounted in sample answers, as we have been given the rate and expected time of loss payment? (Similar argument for sub questions b and c)
Comments
For some reason, discounting is not included in the definition of the 10-10 rule in the syllabus text, and is rather included in the definition of Expected Reinsurance Deficit. They may have accepted your approach as well.
Options 2 and 3 fail, because the events in question have chances of occurring less than 10%.