Premium should it charge if company wishes expected profit

Reference no: EM13146424

Let X be the damage incurred (in $) in a certain type of accident during a given year. Possible values for X are 0, $1000, $5000 and $10,000, with probabilities 0.8, 0.1, 0.08 and 0.02 respectively. A particular company offers a $500 deductible policy. If the company wishes its expected profit to be $100, what premium should it charge?

Reference no: EM13146424

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