The table shows claims and their probabilities for an insurance company. Amount of claim (to the nearest $20,000) Probability $0 0.70 $20,000 0.16 $40,000 0.07 $60,000 0.04 $80,000 0.02 $100,000 0.01 a. Calculate the expected value? b. How much should the company charge as an average premium so that it breaks even on its claim costs? c. How much should the company charge to make a profit of $50 per policy?

The table shows claims and their probabilities for an insurance company. Amount of claim (to the nearest $20,000) Probability $0 0.70 $20,000 0.16 $40,000 0.07 $60,000 0.04 $80,000 0.02 $100,000 0.01 a. Calculate the expected value? b. How much should the company charge as an average premium so that it breaks even on its claim costs? c. How much should the company charge to make a profit of $50 per policy?

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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Amount of claim (to the nearest $20,000)	Probability
$0	0.70
$20,000	0.16
$40,000	0.07
$60,000	0.04
$80,000	0.02
$100,000	0.01

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