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    Statistics Probability Problem

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    From past experience, an automobile insurance company knows that a given automobile will suffer a total loss with probability .02, a 50% loss with probability .08, or a 25% loss with probability .15 during a year. What annual premium should the company charge to insure a $10,000 automobile, if it wishes to "break even" on all policies of this type? (Assume there will be no other partial loss)

    © BrainMass Inc. brainmass.com April 3, 2020, 1:40 pm ad1c9bdddf
    https://brainmass.com/statistics/probability-density-function/probability-distribution-discrete-random-variables-7603

    Solution Preview

    x p(x)
    $10,000 .02 (represents a total loss)
    $5,000 .08 (represents a 50% loss)
    ...

    Solution Summary

    This solution provides the answer to the probability problem. Supplementary examples are also provided.

    $2.19

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