Question

A motorcycle insurance company has 5,000 policy holders, and the accident rate is 0.08. The company needs to invest $400,000 this year.
Each accident costs $18,000 on average.
If they want a plan with a deductible of $4,000, they need to charge a minimum of $___ for premiums.
If they want a plan with a premium of $1,000, they need to charge a minimum of $_____ for deductibles.

Answer 1

Answer:

Step-by-step explanation:

minimum charge =x

total premium =5000*x=5000x

net expenses incurred = 18000-4000=14000

total expenses =14000*(0.08*5000)=560,000,000

total premium =400000+5600000=6,000,000

x=600000/5000=1200

minimum charge =1200