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?

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Definitions:

Conscious Attributions

The process of deliberately reasoning about the causes of one's own or others' behavior and outcomes.

Situations

are sets of circumstances or contexts in which events occur, potentially influencing the behavior and outcomes of individuals involved.

Impression Management

The process through which individuals attempt to control the perceptions others have of them.

Manipulate

To control or influence someone or something cleverly, unfairly, or unscrupulously, often without their knowledge.