An insurance company will insure a $75,000 Hummer for its full value against theft at a premium of $1500 per year.Suppose that the probability that the Hummer will be stolen is 0.0075.Calculate the expected net profit for the insurance company.
A)$937.50
B)$551.25
C)$1488.75
D)$562.50

Question

Quizplus · Accepted Answer

The expected net profit is calculated as: Premium - (Probability of theft * Value of Hummer). So, $1500 - (0.0075 * $75,000) = $937.50.

An Insurance Company Will Insure a $75,000 Hummer for Its