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Ignoring other partial losses, what premium should the insurance company charge each season to realize an average profit of $500?

Ignoring other partial losses, what premium should the insurance company charge each season to realize an average profit of $500?

A First Course in Probability (10th Edition)
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...
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3. A race car driver wishes to insure his car for the racing season for $50,000. The insurance company estimates a total loss may occur with probability 0.002, a 50% loss with probability 0.01, and a 25% loss with probability 0.1. Ignoring other partial losses, what premium should the insurance company charge each season to realize an average profit of $500?
Transcribed Image Text:3. A race car driver wishes to insure his car for the racing season for $50,000. The insurance company estimates a total loss may occur with probability 0.002, a 50% loss with probability 0.01, and a 25% loss with probability 0.1. Ignoring other partial losses, what premium should the insurance company charge each season to realize an average profit of $500?
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