The probability distribution for damage claims paid by the Newton Automobile Insurance Company on collision insurance follows. Payment ($) Probability 10 500 1,000 3,000 5,000 8,000 0.81 0.08 0.04 0.03 0.02 0.01
The probability distribution for damage claims paid by the Newton Automobile Insurance Company on collision insurance follows. Payment ($) Probability 10 500 1,000 3,000 5,000 8,000 0.81 0.08 0.04 0.03 0.02 0.01
College Algebra
7th Edition
ISBN:9781305115545
Author:James Stewart, Lothar Redlin, Saleem Watson
Publisher:James Stewart, Lothar Redlin, Saleem Watson
Chapter9: Counting And Probability
Section9.4: Expected Value
Problem 20E
Related questions
Question
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![The probability distribution for damage claims paid by the Newton Automobile Insurance
Company on collision insurance follows.
Payment ($) Probability
0.81
0.08
0.04
0.03
0.02
0.01
0.01
0
500
1,000
3,000
5,000
8,000
10,000
Use the expected collision payment to determine the collision insurance premium (in dollars)
that would enable the company to break even.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1858a710-c111-4513-9004-6c10bf7d1d6e%2F966337df-e74c-420c-b69a-f762c06d9893%2Fzp3nwkz_processed.png&w=3840&q=75)
Transcribed Image Text:The probability distribution for damage claims paid by the Newton Automobile Insurance
Company on collision insurance follows.
Payment ($) Probability
0.81
0.08
0.04
0.03
0.02
0.01
0.01
0
500
1,000
3,000
5,000
8,000
10,000
Use the expected collision payment to determine the collision insurance premium (in dollars)
that would enable the company to break even.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
Step 1
Given that,
The probability distribution for damage claims by the Newton Automobile Insurance Company on collision insurance is
Payment | Probability |
0 | 0.81 |
500 | 0.08 |
1000 | 0.04 |
3000 | 0.03 |
5000 | 0.02 |
8000 | 0.01 |
10000 | 0.01 |
The formula for the expected value is as follows,
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