Originally Posted by zhaoc033
the solutions says E 3L | K42 > 3] = 1000 A45 - 1000 P40 - 1000 P42 a42
Why does this formula apply here? Is there a chapter in ASM i can refer to for this formula?
If you read the problem, you'll see that the premium structure for that policy is extremely
unusual. There is no chance ASM will have the specific formula for such an unusual insurance. ASM should tell you what 3L means and how to approach calculating an expected value of 3L for pretty much any insurance. It would be in a chapter on reserves probably.