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 First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
icon
Related questions
Question

I need help with this please attached

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.)
Expert Solution
steps

Step by step

Solved in 6 steps with 5 images

Blurred answer
Recommended textbooks for you
A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
Probability
ISBN:
9780134753119
Author:
Sheldon Ross
Publisher:
PEARSON
A First Course in Probability
A First Course in Probability
Probability
ISBN:
9780321794772
Author:
Sheldon Ross
Publisher:
PEARSON