Interpret the Mean of a Discrete Random Variable as an Expected

question 29

Short Answer

Interpret the Mean of a Discrete Random Variable as an Expected Value
-An automobile insurance company estimates the following loss probabilities for the next year on a $\$ 25,000$ sports car:
$\begin{array} { l r } \text { Total loss: } & 0.001 \\ 50 \% \text { loss: } & 0.01 \\ 25 \% \text { loss: } & 0.05 \\ 10 \% \text { loss: } & 0.10 \end{array}$
Assuming the company will sell only a $\$ 500$ deductible policy for this model (i.e., the owner covers the first $\$ 500$ damage), how much annual premium should the company charge in order to average $\$ 450$ profit per policy sold?

Analyze and calculate asset depreciation using various methods such as straight-line, double-declining balance, and units-of-production.

Recognize the impact of not recording amortization or depreciation expenses on financial statements.

Understand the differentiation between capital and revenue expenditures and the impact on asset valuation.

Identify and account for impairment losses on assets and their effect on financial statements.

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