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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 0.84, 0.10, 0.04, and 0.02, respectively. A particular company offers three different policies: a $200 deductible with a $800 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. Deductible Premium Profit $200 $800 $500 $700 $1000 $580

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Statistics and Probability, Statistics

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