Question

Problem 5 An insurance company issues a policy on a car under the following conditions: (i)...

Problem 5

An insurance company issues a policy on a car under the following conditions:

(i) The replacement cost of $37,000 will be paid for a total loss.

(ii) If it is not a total loss, but the damage is more than $11,000, then only $ 10,500 will be paid.

(iii) Nothing will be paid for damage costing $11,000 or less and, (iv) Nothing will be paid out if

there is no damage.

The company estimates, based on their internal research, the probability of the first three events

as 0.05, 0.15, and 0.25, respectively.

a) Compute the expected amount paid out in a year.

b) If the company wishes to make a profit of $200 a policy, what is the amount the company

should charge per month?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1a) An insurance company would like to offer theft insurance for renters. The policy would pay...
1a) An insurance company would like to offer theft insurance for renters. The policy would pay the full replacement value of any items that were stolen from the apartment. Some apartments have security alarms installed. Such systems detect a break-in and ring an alarm within the apartment. The insurance company estimates that the probability of a theft in a year is 0.05 if there is no security system and 0.01 if there is a security system (there cannot be more...
Vladimir had a car accident that left him with minor injuries. The car damage was estimated...
Vladimir had a car accident that left him with minor injuries. The car damage was estimated at $3,000 while his medical bill was $800. If his car coverage policy has a $300 deductible and his health insurance has $150 deductible. How much in total will the insurance company cover? Now if the car damage was estimated at $2300 while his medical bill was $800 and his car coverage policy has a $400 deductible and his health insurance has $200 deductible,...
Given the following info, I created a trial balance (also shown below): Karen Noonan opened Kingbird...
Given the following info, I created a trial balance (also shown below): Karen Noonan opened Kingbird Inc. on February 1, 2017. During February, the following transactions were completed: Feb. 1 Issued 4,400 shares of Kingbird common stock for $13,260. Each share has a $1.50 par. 1 Borrowed $8,000 on a 2-year, 6% note payable. 1 Paid $9,200 to purchase used floor and window cleaning equipment from a company going out of business ($4,440 was for the floor equipment and $4,760...
Question 36 ABC Company issues $10,000,000, 8%, 10-year bonds at 96.5 on July 1, 2019. Interest...
Question 36 ABC Company issues $10,000,000, 8%, 10-year bonds at 96.5 on July 1, 2019. Interest is paid on July 1 and January 1. The journal entry to record the issuance will include a debit to cash for $10,000,000 a credit to cash for $9,650,000 a credit to bonds payable for $9,650,000 a debit to discount on bonds payable for $350,000 Question 37 DEF Corporation retires its $100,000 face value bonds at 105 on January 1, following the payment of...
The following independent situations require professional judgement to determine when to recognize revenue under the revenue...
The following independent situations require professional judgement to determine when to recognize revenue under the revenue recognition principle.   Identify the month in which revenue should be recognized for the following transactions: 8.   On January 2nd, 2019 you order and pay for 2 tickets on your Visa card for the February 28th, 2019 Canucks game against San Jose. You receive the tickets in the mail on January 9th. You receive the Visa bill in late January but you don’t pay your...
Question 7 Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5...
Question 7 Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5 rights issue on 1 October 2017 at a price of GH¢1. The market value on the last day of quotation with rights was GH¢1.60. Total earnings are GH¢50,000 in 2017 and GH¢40,000 in 2016. Required: Calculate the Earnings per share for the year ended 31 December 2017 and the corresponding figure for 2016 in accordance with IAS 33: Earnings per share Question 5 Adom...
I completed everything except for the last part. I know my answers are right because i...
I completed everything except for the last part. I know my answers are right because i double checked but i just dont know how to answer the last section. Problem 3-1 Schedule C (LO 3.1) Scott Butterfield is self-employed as a CPA. He uses the cash method of accounting, and his Social Security number is 644-47-7833. His principal business code is 541211. Scott's CPA practice is located at 678 Third Street, Riverside, CA 92860. Scott’s income statement for the year...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind of your average Argentine, who remembers the tough times and hyperinflation of the 1980s, the events of 2001 and 2002 have brought fiscal policy back to the forefront of public concern. Though the early 1990s may have been characterized by financial optimism, Argentina has been in a recession since Brazil's 1998 monetary crisis sent shockwaves across the regional and global markets. In early 2002,...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT