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Problem #1 (Expected Value. No need for Megastat on this one) The probability distribution for damage claims paid by the Newton Automobile Insurance...
Problem #1 (Expected Value. No need for Megastat on this one)The probability distribution for damage claims paid by the Newton Automobile Insurance Company on collision insurance follows.Payment ($)Probability0.85500.041000.043000.035000.028000.0110000.01(a)Use the expected collision payment to determine the collision insurance premium that would enable the company to break even on the policy.(b)The insurance company charges an annual rate of $520 for the collision insurance. What is the expected value of the collision policy for a policyholder? (Hint: It is the expected payments from the company minus the cost of the coverage). Why does a policyholder purchase a collision policy with this expected value?i have no idea how to approach this!
