An insurance company charges a customer an annual premium of $1200 to I insure a car against theft. In the event of theft a payment of $15 000 will be made to the customer. The probability of theft is empirically estimated to be 0.02. (a) (b) Find the expected value of the insurance policy to the customer. Find the premium which should be charged if the policy is to be fair.

An insurance company charges a customer an annual premium of $1200 to I insure a car against theft. In the event of theft a payment of $15 000 will be made to the customer. The probability of theft is empirically estimated to be 0.02. (a) (b) Find the expected value of the insurance policy to the customer. Find the premium which should be charged if the policy is to be fair.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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