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A private pilot wishes to insure his airplane for $400,000. The insurance company estimates that a total loss will occur with probability 0.006, a 50% loss with probability 0.04, and a 20% loss with probability 0.1. Ignoring all other partial losses, what premium should the insurance company charge each year to realize an average profit of $800?

A private pilot wishes to insure his airplane for $400,000. The insurance company estimates that a total loss will occur with probability 0.006, a 50% loss with probability 0.04, and a 20% loss with probability 0.1. Ignoring all other partial losses, what premium should the insurance company charge each year to realize an average profit of $800?

College Algebra
College Algebra
10th Edition
ISBN:9781337282291
Author:Ron Larson
Publisher:Ron Larson
Chapter8: Sequences, Series,and Probability
Section: Chapter Questions
Problem 41CT: On a game show, a contestant is given the digits 3, 4, and 5 to arrange in the proper order to form...
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A private pilot wishes to insure his airplane for $400,000. The insurance company estimates that a total loss will occur with probability 0.006, a 50% loss with probability 0.04, and a 20% loss with probability 0.1. Ignoring all other partial losses, what premium should the insurance company charge each year to realize an average profit of $800? The insurance company should charge $ each year. (Type an integer or a decimal. Round to the nearest dollar as needed.)
Transcribed Image Text:A private pilot wishes to insure his airplane for $400,000. The insurance company estimates that a total loss will occur with probability 0.006, a 50% loss with probability 0.04, and a 20% loss with probability 0.1. Ignoring all other partial losses, what premium should the insurance company charge each year to realize an average profit of $800? The insurance company should charge $ each year. (Type an integer or a decimal. Round to the nearest dollar as needed.)
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