Sweetwater & Associates Write Weekend Trip Insurance at a Very

question 114

Multiple Choice

Sweetwater & Associates write weekend trip insurance at a very nominal charge. Records show that the probability that a motorist will have an accident during the weekend and file a claim is 0.00555. Suppose they wrote 400 policies for the coming weekend, approximately how many claims could they expect to be filed?

• A) 200
• B) 20
• C) 2
• D) 0.2

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Definitions:

Agency Relationship

A legal and fiduciary relationship where one party, the agent, acts on behalf of another, the principal, in business transactions.

Agent's Negligence

A failure by an agent to exercise the care, diligence, and skill that a reasonably prudent person would exercise in similar circumstances.

Principal

Principal refers to the original sum of money loaned or invested, before interest, or the main party to a transaction or agreement.

Damages

A sum of money awarded in compensation for loss or injury caused by the wrongful act of another party.