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

The appropriate response is "$430".

Step-by-step explanation:

According to the question, the solution will be:

⇒
`E(x)=\Sigma xP(x)`

By substituting the values, we get

⇒
`=0* 0.85+500* 0.04+1000* 0.04+3000* 0.03+5000* 0.02+8000* 0.01+10000* 0.01`

=
`430` ($)

Thus, the above is the correct answer.