Homeowner policy holders for the dollar amount

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Ease of Mind Inc. is an insurance company that reimburses its homeowner policy holders for the dollar amount of damage experienced due to a significant fire episode. Last year the company insured 20,000 homes each valued at $800,000. Of these 20,000 homes, the company settled 180 claims (last year) due to fire damage as follows: 30 homeowners were re-imbursed for 100% fire damage; 60 homeowners were re-imbursed for 50% fire damage; and 90 homeowners were re-imbursed for 25% fire damage (no other claims were submitted). For the upcoming year, compute the annual premium that the company should charge each of its fire insurance policy holders who own $ 800,000 homes in order to achieve a profit of $300 per home insured, based on the claims information from last year. Note that the annual profit per home insured, equals the annual premium minus the dollar amount that the insurance company reimburses to cover home fire damage incurred by each of its policy holders. Show all your work. Keep your work to at least 4 decimals. NOTE: Make sure that you construct (and display) an appropriate probability distribution table as part of your work.

Reference no: EM133259661

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