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The probability distribution of damage claims paid by Insurance ABC on collision insurance is as followed: Payment ($) Probability 0 0.85 500 0.04 1000 0.04 3000 0.03 5000 0.02 8000 0.01 10000 0.01 How much should the collision insurance premium be so the company can break even

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Cricetus

Answer:

The appropriate response is "$430".

Explanation:

According to the question, the solution will be:

⇒ [tex]E(x)=\Sigma xP(x)[/tex]

By substituting the values, we get

⇒          [tex]=0\times 0.85+500\times 0.04+1000\times 0.04+3000\times 0.03+5000\times 0.02+8000\times 0.01+10000\times 0.01[/tex]

= [tex]430[/tex] ($)

Thus, the above is the correct answer.