Posted by **john** on Saturday, June 26, 2010 at 1:16pm.

Jim has a 5-year-old car in reasonably good condition. He wants to take out a $30,000 term (that is, accident benefit) car insurance policy until the car is 10 years old. Assume that the probability of a car having an accident in the year in which it is x years old is as follows:

x = age

5

6

7

8

9

P (accident)

0.01191

0.01292

0.01396

0.01503

0.01613

Jim is applying to a car insurance company for his car insurance policy. If the car insurance company wants to make a profit of $900 above the expected total losses, how much should it charge for the policy? Round your answer to the nearest dollar

- statistic -
**DianeC**, Wednesday, April 11, 2012 at 8:53pm
expected payout

E[x] = 30,000(0.01191 + 0.01292 + 0.01396 + 0.01503 + 0.01613)

= $2,098.50

=> $2,099

charge needed for $900 profit

= $(2099 + 900)

= $2999

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