Ms Rich Has Just Bought a New $30,000 Car

question 25

Essay

Ms. Rich has just bought a new $30,000 car. As a reasonably safe driver, she believes that there is only a 5% chance of being in an accident in the forthcoming year. If she is involved in an accident, the damage to her new car depends on the severity of the accident. The probability distribution for the range of possible accidents and the corresponding damage amounts (in dollars) are shown in the table below. Ms. Rich is trying to decide whether she is willing to pay $170 each year for collision insurance with a $300 deductible. Note that with this type of insurance, she pays the first $300 in damages if she causes an accident, and the insurance company pays the remainder.
Distribution of Accident Types and Corresponding Damage Amounts
-Generate a statistical summary and risk profile for each of Mrs. Rich's possible decisions. Does this information impact her decision?

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Definitions:

Family Development

The process of change and evolution in family relationships and structure over time.

Family Life Cycle

The transitions that a family makes as it moves through a series of stages or events.

Structural-Functionalism

A sociological theoretical framework that views society as a complicated system in which its components collaborate to foster unity and steadiness.

Social Stratification

The hierarchical organization of a society into levels based on factors like wealth, power, and status.