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Liability Insurance Policy

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4. If a firm wants to have $1 million in cash available in three years, how much must it invest now at an 8 percent interest rate?

5. An insured has the following four liability insurance policies: $300,000 with insurer A, $300,000 with insurer B, $700,000 with insurer C, and $900,000 with insurer D. Each policy apportions losses using the equal shares method.

o How much will each policy pay for a $200,000 loss?
o How much will each policy pay for a $2 million loss?

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Solution Summary

The solution computes insurance losses apportionment and present value of money.

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