In a given year there is a 3% chance you will get in a small accident costing around $2000 and 0.1% chance you will get in a major accident costing around $150,000 and a 96.9% chance you will not get in any accident what premium should insurance company charge if they want an average profit of $400

Answer:$475Step-by-step explanation:There are 3 possible accident in this question 3% chance of losing $2000 0.1% chance of losing $150,000 96.9% chance of losing $0 Then the expected value that you will lose is: 3%*  $2000  + (0.1% *  $15000) + (96.9% * $0)= $75 Profit made by subtracting the price with the lose. If the company want average profit $400, the charge should be: average profit = premium price - average lose premium price= average profit + average lose premium price= $400 + $75 = $475