Homework Answers
Expected medical spending for 200 people = $1200000
Leading fee = 20% of expected medical spending = 20% of $1200000 = $240000
Total spending = $1200000 + $240000 = $1440000
Average premium = Total spending / number of people = $1440000 / 200 = $7200
Hence, $7200 is the correct answer.
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