The expected value of the motor home is $19,660 = (.02 x $3,000 + .98 x $20,000). Thus, fair insurance for the motor home would cost $340 = (.02 x $17,000), where $17,000 is the net loss from an accident.

Answer rating: 100% (QA)

Value 20000 Salvage Value if destroyed 3000 Net Loss 20000 3000 17000 ... View the full answer