A probability question about expected value

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SUMMARY

The discussion centers on calculating the premium for a one-year $1000 insurance policy issued by an insurance company, considering an occurrence rate of 2% for event A. The expected payout per policy is determined by multiplying the probability of occurrence (0.02) by the payout amount ($1000), resulting in an expected payout of $20 per policy. Including administrative fees of $15 and a desired profit of $50, the total premium should be set at $85 per policy to ensure profitability.

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dmatador
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An insurance company issues a one-year $1000 policy against an occurrence A that happens to 2 out of every 100 owners of the policy. Administrative fees are $15 per policy and not part of the companies profit. How much should the company charge per policy to make a profit of $50 per policy?
 
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Well, what have you done on this? You can't just post a problem and expect people to do it for you! If "occurrence A" happens to 2 out of every 100 customers, and the insurance company pays out $1000 for every occurrence, what is the expected payout? What is the expected payout per policy? Now add costs and profit to that.
 

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