An Insurance Company Insures 100,000 Cars in a Certain Area

question 64

Multiple Choice

An insurance company insures 100,000 cars in a certain area. The company has determined that on average, each year they will have to pay the following amounts for accidents in the area: ​
$100,000 with probability 0.0004
$50,000 with probability 0.001
$25,000 with probability 0.006
$5000 with probability 0.011
$1000 with probability 0.023
​
What is the company's expected payout per car each year?
​

• A)$318.00
• B)$4163.00
• C)$4140.00
• D)$381.60
• E)$279.84

---

Definitions:

Optimal Mix

The best possible combination of elements, such as products, services, or investments, to achieve a specific goal, like maximizing profit or customer satisfaction.

Fish Tacos

A culinary staple in coastal areas, consisting of lightly battered and fried fish wrapped in a corn or flour tortilla and often served with cabbage slaw and a creamy sauce.

Chicken Tacos

A popular Mexican dish consisting of a tortilla filled with seasoned chicken, and often accompanied by toppings such as lettuce, tomatoes, and cheese.

Cost of Overstocking

Expenses incurred from having excess inventory, including storage costs, decreased product value, and potential waste.