Question

Both nadia and samantha are applying to insure their car against theft. nadia lives in a secure neighborhood, where the probability of theft is 10%. samantha lives in a lesser secure neighborhood where the probability of theft is 25%. both nadia and samantha own cars worth $10,000, and are willing to pay $100 over expected loss for insurance. ​ how much would samantha be willing to pay for the insurance? a. ​ $1100 b. ​ $2600 c. ​ $2500 d. ​ $1000

Answer 1

Samantha will be willing to pay $ 2,600. The right answer is B.

Step-by-step explanation:

Acording to the details, the probability of loss in case of Samantha's neighborhood is 25%.

Hence, the expected loss to her will be = 25/100 * 10000 = $2500

Samantha is willing to pay $100 over her expected loss, hence the amount that Samantha be willing to pay = ($2500 + $100 ) = $2600

Samantha will be willing to pay $2600