A 1000 deductible with a 580 premium. a y deductible means, Ask an Expert

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Let X be the damage incurred (in $) in a certain type of accident during a given year. Possible X values are 0, 1000, 5000, and 10000, with probabilities 0.82, 0.10, 0.06, and 0.02, respectively. A particular company offers three different policies: a $200 deductible with a $790 premium, a $500 deductible with a $700 premium, and a $1000 deductible with a $580 premium. (A $Y deductible means the insurance company pays X - Y for X >= Y and X for X < Y.) Compute the profit for each policy.

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