The premium is computed via the expectation principle namely

The premium is computed via the expectation principle, namely we have p = (l + eta) E (Xk times U), where n Element [0, 1] is called the safety loading (indicate by how much the premium should exceed the average claim amount per customer). Use Python to write a function to compute the premium taking on U, q and eta as parameter. Compute the premium for q = 0.1,  U = 1000 and eta = 0.05.

Solution

//Following is the python script for given statement.

//Answer for both question is given.

def cal(U,n,q):
   p=0
   p=(1+n)*(q*U)
   return p
print cal(1000,0.05,0.1)

Output :

105.0