Question

The probability distribution of damage claims paid by Insurance ABC on collision insurance is as followed: Payment ($) Probability 0 0.85 500 0.04 1000 0.04 3000 0.03 5000 0.02 8000 0.01 10000 0.01 How much should the collision insurance premium be so the company can break even

Answer 1

Answer:

The appropriate response is "$430".

Explanation:

According to the question, the solution will be:

⇒ $E(x)=\Sigma xP(x)$

By substituting the values, we get

⇒          $=0\times 0.85+500\times 0.04+1000\times 0.04+3000\times 0.03+5000\times 0.02+8000\times 0.01+10000\times 0.01$

= $430$ ($)

Thus, the above is the correct answer.