Jim has a 5-year-old car in reasonably good condition. He wants to take out a $40,000 term (that is, accident benefit) car insurance policy until the car is 10 years old. Assume that the probability of a car having an accident in the year in which it is x years old is as follows:
x = age5
6
7
8
9
P(accident)0.01182
0.01282
0.01386
0.01513
0.01602
Jim is applying to a car insurance company for his car insurance policy. If the car insurance company charges $5000 for the policy and the expected total loss is $2786, how much profit does the company expect to make? Round your answer to the nearest dollar.
A. $2214
B. $2217
C. $2212
D. $2209
E. $2215
Answer: A
Mathematics
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