Consider a car owner who has an 80% chance of no accidents in a year, a 20% chance of being in a single accident in a year, and no chance of being in more than one accident in a year. For simplicity, assume that there is a 50% probability that after the accident the car will need repairs costing $500, a 40% probability that the repairs will cost $5,000, and a 10% probability that the car will need to be replaced, which will cost $15,000. What is the expected loss for the car owner per year

The expected loss for the car owner per year is $750.

Step-by-step explanation:

We are given that a car owner who has an 80% chance of no accidents in a year, a 20% chance of being in a single accident in a year, and no chance of being in more than one accident in a year.

Let X = Loss for the particular year for a car owner

Now as we know that the loss to the car owner may be of $0, $500, $5,000 or $15,000 because these amount he has to pay as a part of repair cost if his car met with an accident.

So, the probability distribution of X is given by;

           X (Amount of Loss)                               P(X)

                     $0                                                      0.80

                      $500                                            (0.20)(0.50) = 0.10

                      $5,000                                         (0.20)(0.40) = 0.08

                      $15,000                                        (0.20)(0.10) = 0.02

                       Total                                                         1                    

Here, the probability of (0.20)(0.50) means that for the loss of $500, first the car must have to met with an accident and then there is 50% chance that after the accident the car will need repairs costing $500.

Now, the expected loss for the car owner per year is  =

     =  

                           =  50 + 400 + 300 = $750.

So, the expected loss for the car owner per year is $750.

total amount of money that he should pay if he has not used his duty free exemption is $98

step-by-step explanation:

given a united states citizen returning to the states declares the following items at the customs office: 3 shirts at $8.50 each 2 dresses at $27.50 each 1 pair of gold cuff links at $17.50 per pair. we have to find how much he pay

cost of 3 shirts if one cost at $8.50 is

cost of 2 dresses if one cost at $27.50 is  

cost of 1 pair of gold cuff at $17.50

so, total amount of money that he should pay if he has not used his duty free exemption is   $25.5+$55+$17.50=$98