Answer:
Your annual expected value is -$550.
Step-by-step explanation:
0.002 probability that you will total your car.
If you total your car, you pay the insurance of $600, but you get the $25,000 insurance. So in total, the net value will be $24,400.
1-0.002 = 0.998 probability that you will not total your car.
In this case, you lose $600.
What is your annual expected value?
Multiply each net value by it's probability.
E = 0.002*24400 - 0.998*600 = -550
Your annual expected value is -$550.
