Multiple Choice
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.
-Suppose the insurance company cannot tell them apart but expects them to be different values and charges them an average premium of $1850. How much profit would it make?
A) $1850
B) Zero-they would break even
C) They would make a loss of $650
D) They would make a loss of $1100
Correct Answer:
Verified
Correct Answer:
Verified
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