Question

How much should the insurance company charge as an average premium so that it breaks even on its claim costs?

A: $16,000
B: $24,000
C: $28,000
D: $32,000

Attached image in comments:

Answer 1

You need the expected value here I think. So sum the product of each amount probability pair. 50k*0.25 + 100k*0.09 + .... + 250k*0.01

Answer 2

Thank you !