Expected payout that company can expect from insuring

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Suppose there are wo drivers, Jermaine and Jane. Jermaine is not a safe driver. In fact, there is a 7.5% chance that he will have an accident within the next year. Jane is a relatively safe driver. Her chances of having an accident in the next year are only 1%. If Jermaine is involved in an accident, he will cost the insurance company $1,000,000. If Jane is involved in an accident, she will only cost the company $500,000. What is the expected payout that the company can expect from insuring these two?

Reference no: EM131566059

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