An insurance company estimates that drivers have 1% chance of getting into an accident that will cost the driver $10,000. There are two types of drivers: the ones with $50,000 in the bank and the ones with only $5,000. In case of an accident those with $5,000 will declare bankruptcy and creditors could only recover $5,000. What is the fair price of insurance and will those with $5,000 in the bank buy it? Why?

An insurance company estimates that drivers have 1% chance of getting into an accident that will cost the driver $10,000. There are two types of drivers: the ones with $50,000 in the bank and the ones with only $5,000. In case of an accident those with $5,000 will declare bankruptcy and creditors could only recover $5,000. What is the fair price of insurance and will those with $5,000 in the bank buy it? Why?

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 57P

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