The probability distribution for damage claims paid by the Newton Automobile Insurance Company on collision insurance follows

Question:

The probability distribution for damage claims paid by the Newton Automobile Insurance

Company on collision insurance follows

Payment ($) Probability

0 ............85

500 ............04

1000 ............04

3000 ............03

5000 ............02

8000 ............01

10000 ............01

a. Use the expected collision payment to determine the collision insurance premium that would enable the company to break even.

b. The insurance company charges an annual rate of $520 for the collision coverage. What is the expected value of the collision policy for a policyholder? Why does the policy holder purchase a collision policy with this expected value?

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...