Jim has a 5-year-old car in reasonably good condition. He wants to take out a $30,000 term (that is, accident benefit) car insurance policy until the car is 10 years old. Assume that the probability of a car having an accident in the year in which it is x years old is as follows: $$\begin{array} { l c c c c c }
x = \text { age } & 5 & 6 & 7 & 8 & 9 \
P \text { (accident) } & 0.01191 & 0.01292 & 0.01396 & 0.01503 & 0.01613
\end{array}$$ Jim is applying to a car insurance company for his car insurance policy. If the car insurance company charges $6000 for the policy and the expected total loss is $2099, how much profit does the company expect to make? Round your answer to the nearest dollar.
A)$3902
B)$3905
C)$3900
D)$3897
E)$3903

Question

Jim has a 5-year-old car in reasonably good condition. He wants to take out a $30,000 term (that is, accident benefit) car insurance policy until the car is 10 years old. Assume that the probability of a car having an accident in the year in which it is x years old is as follows: $$\begin{array} { l c c c c c } 
x = \text { age } & 5 & 6 & 7 & 8 & 9 \
P \text { (accident) } & 0.01191 & 0.01292 & 0.01396 & 0.01503 & 0.01613
\end{array}$$ Jim is applying to a car insurance company for his car insurance policy. If the car insurance company charges $6000 for the policy and the expected total loss is $2099, how much profit does the company expect to make? Round your answer to the nearest dollar.
A)$3902
B)$3905
C)$3900
D)$3897
E)$3903

Quizplus · Accepted Answer

The expected profit for the company is the difference between the amount charged for the policy ($6000) and the expected total loss ($2099). Therefore, the expected profit is $6000 - $2099 = $3901. Rounding to the nearest dollar gives $3901, which is closest to choice A, $3902.

Jim Has a 5-Year-Old Car in Reasonably Good Condition Jim Is Applying to a Car Insurance Company for His