Maritime insurance company offers insurance policies

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Reference no: EM1321732

Q. Maritime Insurance Company offers insurance policies for recreational boats. A typical policy will pay the replacement cost of $2500 if the boat is a total loss. If the boat is not a total loss but the damage is more than $10,000 the policy pays $5,000. For damage under $10,000, no coverage is offered. The company estimates the probability of no damage to be .60 the probability of damage among $0 also $10,000 to be .25 also the probability of damage among $10,000 also $25,000 to be.12 if the company wants to make a profit of $200 above the expected cots, illustrate what should be the cost of the policy?

Reference no: EM1321732

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