Find the expected value of the collision policy holder

Assignment Help Basic Statistics

Reference no: EM13145385

The probability distribution for collision insurance claims paid by The Newton Automobile Insurance Company is as follow:
Claims Probability
0 0.90
500 0.04
1000 0.03
2000 0.01
3000 0.01
4000 0.01

A) Use the expected collision claim amount to determine the collision insurance premium that would allow the company to break even on the collision portion of the policy?

I got $140 ( is this correct?)

B) the insurance company charges an annual rate of $250 for the collision coverage. What is the expected value of the collision policy holder?

C) Why does the policy holder purchase a collision policy with the expected value in B)?

Reference no: EM13145385

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