Use the following setup for question
Both Nadia and Samantha are applying to insure their car against theft.Nadia lives in a secure neighborhood,where the probability of theft is 10%.Samantha lives in a lesser secure neighborhood where the probability of theft is 25%.Both Nadia and Samantha own cars worth $10,000,and are willing to pay $100 over expected loss for insurance.
-How much would Samantha be willing to pay for the insurance?
A)$1000
B)$1100
C)$2500
D)$2600

Question

​Use the following setup for question
Both Nadia and Samantha are applying to insure their car against theft.Nadia lives in a secure neighborhood,where the probability of theft is 10%.Samantha lives in a lesser secure neighborhood where the probability of theft is 25%.Both Nadia and Samantha own cars worth $10,000,and are willing to pay $100 over expected loss for insurance.
-​How much would Samantha be willing to pay for the insurance?
A)​$1000
B)$1100
C)$2500
D)​$2600

Quizplus · Accepted Answer

Samantha's expected loss due to theft is 25% of $10,000, which equals $2,500. She is willing to pay $100 over this expected loss, making her maximum willingness to pay $2,600 for the insurance.

​Use the Following Setup for Question

Use the Following Setup for Question