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 Nadia be willing to pay for the insurance?
A)$900
B)$1000
C)$1100
D)$1200

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 Nadia be willing to pay for the insurance?
A)​$900
B)$1000
C)$1100
D)​$1200

Quizplus · Accepted Answer

Nadia's expected loss due to theft is 10% of $10,000, which is $1,000. She is willing to pay $100 over this expected loss for insurance, making her total willingness to pay $1,100.

​Use the Following Setup for Question

Use the Following Setup for Question