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Assume that the probability of a driver getting into an accident is 5.7% and that the average cost of an accident is $24,500. If the driver's insurance premium is $1686.50, what is the overhead cost for
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Assume that the probability of a driver getting into an accident is 5.7% and

that the average cost of an accident is $24,500. If the driver's insurance
premium is $1686.50, what is the overhead cost for the insurance company
to insure the driver?
A. $256
B. $190
C. $290
D. $260

User Octavio Garbarino
by
6.6k points

1 Answer

3 votes

Answer:

C. $290

Explanation:

The expected cost is:

E = 1686.50 − (0.057) (24500)

E = 290

User HolisticElastic
by
6.9k points
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