O e. $591, $641, $693, $747, $801 19 Jim has a 5-year-old car in reasonably good

Question

O e. $591, $641, $693, $747, $801 19 Jim has a 5-year-old car in reasonably good condition. He wants to take out a $20,000 term (that is, accident benefit) car insurance policy until the car is 10 years old. Assume that the probability of a car having an accident in the year in which it is x years old is as follows: ut of x- age P(accident) 0.01182 0.01282 0.01386 0.01513 0.01602 Jim is applying to a car insurance company for his car insurance policy. If the car insurance company wants to make a profit of $800 above the expected total losses of $1393, how much should it charge for the policy? Select one: O a. $793 O b. $803 ? ?. S801 O d. $805 O e. $813 tion 20 Jim has a S-year-old car in reasonably good condition. He wants to take out a $20,000 term (that is, accident benefit) car insurance policy until the car is 10 years old. Assume that the probability of a car having an accident in the year in which it is a

Explanation / Answer

expected payout
E[x] = 20,000(0.01182 + 0.01282 + 0.01386 + 0.01513 + 0.01602)
= $1393

charge needed for $800 profit
= $(1393 + 800)
= $2193

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