How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Linda_us Your Own Question
Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7291
Experience:  Post Graduate Diploma in Management (MBA)
Type Your Homework Question Here...
Linda_us is online now
A new question is answered every 9 seconds

accident records collected by an automobile insurance complany

This answer was rated:

accident records collected by an automobile insurance complany give the following information:
the probability that an insured driver has an automobile accient is .15
if an accident has occured, the damage to the vehivle amounts to 20% of its market value with probabilty .8, 60% of its market value with .12, and a total loss with probabilty of .08
what premium should the copmlany charge on a 12000 dollar car so that the expected gain by the company is zero?

You need to spend $3 to view this post. Add Funds to your account and buy credits.
Linda_us and 3 other Homework Specialists are ready to help you
Customer: replied 7 years ago.
can i more clarification on how you got it ?
like what probability algorithm you used, is that conditional probability ?

Then the probability for accident happening is .15

Then we calculate the expected value of Damage if there is an accident which is = (12000*20%)*.80 + (12000*60%)*.12 + (12000*100%)*.08 = $3744

Hence the Insurance premium to be charged is calculated by multiplying the probability of accident with expected damage value=$3744*.15= $561.60.

Its a conditional probability.

Regards Linda

Edited by linda_us on 10/29/2009 at 12:56 AM EST

Related Homework Questions