If your interest rate is 8%, what is the expected value of the present worth of the "extra" insurance payments in Problem 10-9.
In Problem 10-9
You recently had an auto accident that was your fault. If you have another accident or receive a moving violation within the next 3 years, you will become part of the "assigned risk" pool, and you will pay an extra $600 per year for insurance. If the probability of an accident or moving violation is 20% per year, what is the probability distribution of your "extra" insurance payments over the next 4 years? Assume that insurance is purchased annually and that violations register at the end of the year-just in time to affect next year's insurance premium.