- #1
war485
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Homework Statement
Suppose that one year, an insurance company incurred dollar damages,
X, in four different amounts with probabilities, p(x), shown below:
X
0
1000
5000
10000
p(x)
0.7
0.2
0.08
0.02
If the company offers a $500 deductable and wants and wants an
expected profit of $150, how much should it charge for the premium?
Homework Equations
Not even sure what's relevant here. Maybe the expected value is involved somehow:
E(x) = sum ( x*p(x) ) = 800
The Attempt at a Solution
How would I even go about with a problem like this?