ANSWERS
An automotive insurance company has 25,000 policyholders. The accident rate is 0.07.
The number of accidents the company will have to pay out for is
1,750
. If the payout for each claim (after deductibles) is $8,000, the company’s total payouts will amount to $
14,000,000
. If the company wants to keep a profit margin of 8%, the premium it must charge is $
604.8
. The company can set aside a maximum amount of $
1,120,000
for this year’s investments.
