ing to get car insurance, with maximum coverage of 136 thousand USD. Let's model the probability of losses over the year as a discrete distribution, as follows: 1 K: 10% 5 K: 2% 10 K: 1% 50 K: 0.5% 136 K: 0.1% If the insurance company wants a 10% premium over expected

ing to get car insurance, with maximum coverage of 136 thousand USD. Let's model the probability of losses over the year as a discrete distribution, as follows: 1 K: 10% 5 K: 2% 10 K: 1% 50 K: 0.5% 136 K: 0.1% If the insurance company wants a 10% premium over expected

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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Question

You are looking to get car insurance, with maximum coverage of 136 thousand USD. Let's model the probability of losses over the year as a discrete distribution, as follows:

1 K: 10%

5 K: 2%

10 K: 1%

50 K: 0.5%

136 K: 0.1%

If the insurance company wants a 10% premium over expected loss, how much will you have to pay for the policy?

Hint: find the expected value of loss for the insurance company, and tack on 10%.

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