An auto insurance company is implementing a new bonus system. In each month, if a policyholder does not have an accident, he or she will receive a 6.00 cash- back bonus from the insurer. Among the 1,000 policyholders of the auto insurance company, 3500 are classified as low-risk drivers and 650 are classified as high-risk drivers. In each month, the probability of zero accidents for high-risk drivers is .75 and the probability of zero accidents for low-risk drivers is .90. Calculate the expected bonus payment from the insurer to the 1,000 policyholders in one year.
An auto insurance company is implementing a new bonus system. In each month, if a policyholder does not have an accident, he or she will receive a 6.00 cash- back bonus from the insurer. Among the 1,000 policyholders of the auto insurance company, 3500 are classified as low-risk drivers and 650 are classified as high-risk drivers. In each month, the probability of zero accidents for high-risk drivers is .75 and the probability of zero accidents for low-risk drivers is .90. Calculate the expected bonus payment from the insurer to the 1,000 policyholders in one year.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 18E: On December 1, 2019, AwakcAllNight Inc. sells 5,000 super caffeinated candy bars to Campus Grocers....
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![An auto insurance company is implementing a new bonus system. In each month,
if a policyholder does not have an accident, he or she will receive a 6.00 cash-
back bonus from the insurer. Among the 1,000 policyholders of the auto insurance
company, 3500 are classified as low-risk drivers and 650 are classified as high-risk
drivers. In each month, the probability of zero accidents for high-risk drivers is
.75 and the probability of zero accidents for low-risk drivers is .90. Calculate the
expected bonus payment from the insurer to the 1,000 policyholders in one year.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d097f01-5a83-463d-8f78-82ccf916d119%2Fcb726a2f-7616-49b9-a415-8ed38a7e64ea%2Fq1pf08m_processed.jpeg&w=3840&q=75)
Transcribed Image Text:An auto insurance company is implementing a new bonus system. In each month,
if a policyholder does not have an accident, he or she will receive a 6.00 cash-
back bonus from the insurer. Among the 1,000 policyholders of the auto insurance
company, 3500 are classified as low-risk drivers and 650 are classified as high-risk
drivers. In each month, the probability of zero accidents for high-risk drivers is
.75 and the probability of zero accidents for low-risk drivers is .90. Calculate the
expected bonus payment from the insurer to the 1,000 policyholders in one year.
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