Both Nadia and Samantha are applying to insure their car against theft. Nadia lives in a secure neighborhood, where the probability of theft is 10%. Samantha lives in a lesser secure neighborhood where the probability of theft is 25%. Both Nadia and Samantha own cars worth $10,000, and are willing to pay $100 over expected loss for insurance. ​ Suppose the insurance company cannot tell them apart but expects them to be different values and charges them an average premium of $1850. How much profit would it make?

Respuesta :

Answer:

Break even point.

Explanation:

The premium from both of them will be = $( 1850 + 1850 )

= $3700

Because  the insurance company is charging $1850 to both of them.

Total amount being paid by both of them  = $( 2600 + 1100 )

= $3700

Deducting the sum of the amount both Nadia and Samantha are willing to pay from the aggregate premium charges to calculate the profit of the company

= $3700 - $3700

= 0

As there is no profit or loss to the insurance company, so that's why it's a break even point.