atrap and bracken are two rival insurance companies. atrap has a yearly premium of $7,000 and a deductible…

atrap and bracken are two rival insurance companies. atrap has a yearly premium of $7,000 and a deductible of $6,000. bracken has a yearly premium of $6,000 and a deductible of $5,000. the average expense of surgery is $25,000. select the correct answer. for bracken to break even (suffer no loss and earn no profit) over the passage of 3 years, about how many claims for surgical procedures can the 1,000 insured people file? a. 1,000 b. 900 c. 90 d. 18 e. 180

atrap and bracken are two rival insurance companies. atrap has a yearly premium of $7,000 and a deductible of $6,000. bracken has a yearly premium of $6,000 and a deductible of $5,000. the average expense of surgery is $25,000. select the correct answer. for bracken to break even (suffer no loss and earn no profit) over the passage of 3 years, about how many claims for surgical procedures can the 1,000 insured people file? a. 1,000 b. 900 c. 90 d. 18 e. 180

Answer

Explanation:

Step1: Calculate total premiums collected

The yearly premium for each of the 1000 insured people in Bracken is $6000. For 3 years, the total premiums collected is $6000\times1000\times3 = 18000000$.

Step2: Calculate net - payment per claim

The average expense of surgery is $25000 and the deductible is $5000. So the net - payment by the insurance company per claim is $25000 - 5000=20000$.

Step3: Calculate number of claims

Let the number of claims be $n$. We set the total net - payments equal to the total premiums collected. So $n=\frac{18000000}{20000}=900$.

Answer:

B. 900