Based on historical data, an insurance company estimates that a particular customer has a 1.2% likelihood of having an accident in the next year, with the average insurance payout being $3500. If the company charges this customer an annual premium of $120, what is the company's expected value of this insurance policy?
Based on historical data, an insurance company estimates that a particular customer has a 1.2% likelihood of having an accident in the next year, with the average insurance payout being $3500. If the company charges this customer an annual premium of $120, what is the company's expected value of this insurance policy?
Chapter9: Sequences, Probability And Counting Theory
Section9.7: Probability
Problem 1SE: What term is used to express the likelihood of an event occurring? Are there restrictions on its...
Related questions
Question
Transcribed Image Text:Based on historical data, an insurance company estimates
that a particular customer has a 1.2% likelihood of having
an accident in the next year, with the average insurance
payout being $3500.
If the company charges this customer an annual premium
of $120, what is the company's expected value of this
insurance policy?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you