Answer :
Answer:
This driver's insurance premium should be at least $990.43.
Step-by-step explanation:
We are given that the probability of a driver getting into an accident is 6.4%, the average cost of an accident is $13,991.05, and the overhead cost for an insurance company per insured driver is $95.
As we know that the expected cost that the insurance company has to pay for each of driver having met with the accident is given by;
The Expected cost to the insurance company = Probability of driver getting into an accident [tex]\times[/tex] Average cost of an accident
So, the expected cost to the insurance company = [tex]0.064 \times \$13,991.05[/tex]
= $895.43
Also, the overhead cost for an insurance company per insured driver = $95. This means that the final cost for the insurance company for each driver = $895.43 + $95 = $990.43.
Hence, this driver's insurance premium should be at least $990.43.