Ms Rich Has Just Bought a New $30,000 Car

question 25

Essay

Ms. Rich has just bought a new $30,000 car. As a reasonably safe driver, she believes that there is only a 5% chance of being in an accident in the forthcoming year. If she is involved in an accident, the damage to her new car depends on the severity of the accident. The probability distribution for the range of possible accidents and the corresponding damage amounts (in dollars) are shown in the table below. Ms. Rich is trying to decide whether she is willing to pay $170 each year for collision insurance with a $300 deductible. Note that with this type of insurance, she pays the first $300 in damages if she causes an accident, and the insurance company pays the remainder.
Distribution of Accident Types and Corresponding Damage Amounts
-Generate a statistical summary and risk profile for each of Mrs. Rich's possible decisions. Does this information impact her decision?

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Definitions:

Viewer

An entity or person observing or consuming content, such as a video, an artwork, or an event.

ERP Results

Data obtained from Event-Related Potentials, which are brain responses measured using electroencephalography (EEG) to specific sensory, cognitive, or motor events.

Auditory Stimulus

A sound or noise that elicits a response or reaction from the auditory system of an organism.

Amplitude Activity

The strength or intensity of various types of waves, including sound waves and brain waves, measured from a baseline to the peak of the wave.