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10 December, 23:32

An insurance company's projected loss ratio is 77.5 percent, and its expense ratio is 23.9 percent. It estimates that dividends to policyholders will add another 5 percent. What is the minimum yield on investments required in order to maintain a positive operating ratio? (LG 15-6)

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  1. 11 December, 00:36
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    6.4%

    Explanation:

    For computing the minimum yield on investment, first we have to find out the combined ratio which is shown below:

    = Projected loss percentage + expense ratio + dividend percentage

    = 77.5% + 23.9% + 5%

    = 106.4%

    So, the minimum yield on investment required is

    = 106.4% - 100%

    = 6.4%

    The 100% is the percentage value

    We simply applied the above formula
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