An insurance company charges a customer an annual premium of $1200 to I insure a car against theft. In the event of theft a payment of $15 000 will be made to the customer. The probability of theft is empirically estimated to be 0.02. (a) (b) Find the expected value of the insurance policy to the customer. Find the premium which should be charged if the policy is to be fair.

An insurance company charges a customer an annual premium of $1200 to I insure a car against theft. In the event of theft a payment of $15 000 will be made to the customer. The probability of theft is empirically estimated to be 0.02. (a) (b) Find the expected value of the insurance policy to the customer. Find the premium which should be charged if the policy is to be fair.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.16P

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