An insurance company found that 2.5% of male drivers between the ages of 18 and
25 are involved in serious accidents annually. Assume that every such accident costs the
company $65,000 and that a driver can only have one of these accidents in a year.
(a) If the company charges $2,500 for such coverage, what is the probability that it
loses money on a single policy?
(b) Suppose that the company writes 1,000 such policies to a collection of drivers.
What is the probability that the company makes a profit on these policies?

Question

An insurance company found that 2.5% of male drivers between the ages of 18 and 	
25 are involved in serious accidents annually. Assume that every such accident costs the 
company $65,000 and that a driver can only have one of these accidents in a year. 
(a) If the company charges $2,500 for such coverage, what is the probability that it 
loses money on a single policy? 
(b) Suppose that the company writes 1,000 such policies to a collection of drivers. 
What is the probability that the company makes a profit on these policies?