A private pilot wishes to insure his airplane for

Chapter 5, Problem 4.9

(choose chapter or problem)

A private pilot wishes to insure his airplane for $200,000. The insurance company estimates that a total loss will occur with probability 0.002, a 50% loss with probability 0.01, and a 25% loss with probability0.1. Ignoring all other partial losses, what premium should the insurance company charge each year to realize an average prot of $500?

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