An actuary is a person who assesses various forms of risk. Based on past data, the holder of an automobile insurance policy pays an insurance premium of $1200 and has a 5% chance of an accident causing $1000 of damage, a 2% chance of $5000 damage and a 1% chance of totaling the car worth $25,000. The probability of the insurance holder making through the year without any accidents is 92%. Find the expected value and interpret it. Is the insurance company likely to make or lose money with this type of policy in the long run

With this policy throughout the long run, the insurance company will make money. A further explanation is provided below.

Explanation:

According to the given values in the question,

The expected value will be:

⇒

By putting all the given values, we get

⇒                

⇒                

⇒                 ($)

As we can see that,

Thus the above is the correct answer.

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.