Assume that the probability of a driver getting into an accident is 7.1%, the average cost of an accident is $14,886.05, and the overhead cost for an
insurance company per insured driver is $110. What should the driver's
insurance premium be?
O A. $1276.27
O B. $1242.93
O C. $1165.49
O D. $1156.43

C - $1165.49

Step-by-step explanation:

We have that the probability of a driver getting into an accident = 7.1% i.e. 0.071.

Now, the average cost of an accident = $14,886.05

Then, the expected cost of an accident =  $14,886.05 × 0.071 = $1056.91

As, the overhead cost for insurance = $110

Therefore, the driver's insurance premium = $1056.91 + $110 = $1166.91

Since, the closest option to $1166.91 is option C.

Hence, the driver's insurance premium will be $1165.49.