An Insurance Company Will Insure a $75,000 Particular Make and Model

question 143

Multiple Choice

An insurance company will insure a $75,000 particular make and model of car for its full value against theft at a premium of $1,500 per year. Suppose that the probability that this particular automobile make and model will be stolen is .0075. Calculate the expected net profit for the insurance company.

• A) $937.50
• B) $551.25
• C) $1488.75
• D) $562.50

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Definitions:

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Step-by-step procedures or formulas for solving problems or completing tasks, used in mathematics and computer programming.

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A cognitive bias that limits a person's ability to use an object only in the way it is traditionally used, preventing them from solving a problem in a creative manner.

Mental Set

A cognitive bias that limits a person to using an approach that has previously worked, even when a different approach might be more beneficial.

Pencil Eraser

A tool made of rubber or similar substances used to remove graphite or ink marks from paper.