An insurance company found that 2.4% of male drivers between the ages of 18 and 25 are involved in serious accidents annually. To simplify the analysis, assume that every such accident costs the insurance company $62,000 and that a driver can only have one of these accidents in a year. Complete parts (a) through (c). (a) If the company charges $2,600 for such coverage, what is the chance that it loses money on a single policy? P(loses money) = .024 (Type an integer or a decimal.) (b) Suppose that the company writes 1,000 such policies to a collection of drivers. What is the probability that the company makes a profit on these policies? Assume that the drivers don't run into each other and behave independently. P(profit) = (Round to five decimal places as needed.)
An insurance company found that 2.4% of male drivers between the ages of 18 and 25 are involved in serious accidents annually. To simplify the analysis, assume that every such accident costs the insurance company $62,000 and that a driver can only have one of these accidents in a year. Complete parts (a) through (c). (a) If the company charges $2,600 for such coverage, what is the chance that it loses money on a single policy? P(loses money) = .024 (Type an integer or a decimal.) (b) Suppose that the company writes 1,000 such policies to a collection of drivers. What is the probability that the company makes a profit on these policies? Assume that the drivers don't run into each other and behave independently. P(profit) = (Round to five decimal places as needed.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:An insurance company found that 2.4% of male drivers between the ages of 18 and 25 are involved in serious accidents
annually. To simplify the analysis, assume that every such accident costs the insurance company $62,000 and that a
driver can only have one of these accidents in a year. Complete parts (a) through (c).
(a) If the company charges $2,600 for such coverage, what is the chance that it loses money on a single policy?
P(loses money)= .024 (Type an integer or a decimal.)
(b) Suppose that the company writes 1,000 such policies to a collection of drivers. What is the probability that the
company makes a profit on these policies? Assume that the drivers don't run into each other and behave independently.
P(profit) = (Round to five decimal places as needed.)
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