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An Insurance Company Will Insure a $75,000 Car for Its

question 138

Essay

An insurance company will insure a $75,000 car for its full value against theft at a premium of $1500 per year. Suppose that the probability that the car will be stolen is 0.0075.
-Calculate the insurance company's expected net profit.


Definitions:

Fiduciary Duty

An obligation to act in the best interest of another party. For instance, a corporation's board member has a fiduciary duty to the shareholders.

Bribe

Offering, giving, receiving, or soliciting something of value for the purpose of influencing the actions of an official or other person in charge of a public or legal duty.

Best Interests

A standard considering the wellbeing and benefits of an individual, especially in legal and financial decisions affecting that person.

Fair Market Value

The price at which property would sell under usual market conditions, reflecting its value when both buyer and seller are reasonably knowledgeable and willing.

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