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 insurance company's expected net profit.
A)$937.50
B)$551.25
C)$1488.75
D)$562.50

Question

Quizplus · Accepted Answer

The expected loss from theft is $75,000 * 0.0075 = $562.50. The premium is $1500, so the expected net profit is $1500 - $562.50 = $937.50.

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