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20 February, 08:19

Assume 6 in every 2000 students at the local community college have to quit due to serious health issues. An insurance company offers them a $10,000 policy for $60 a year. What is the amount the insurance company should expect to make on average on every student that pays?

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  1. 20 February, 08:34
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    Given:

    6 out of 2000 students quit community college due to serious health issues.

    $10,000 insurance company offer

    $60 per year

    Based on the data, there are 6 students who will be given the $10,000 insurance per year. So they need

    6 * 10,000 = $60,000 to make a break-even on their insurance offer

    If a student pays $60 per year, they should have

    $60,000 / $60 = 1,000 students who will pay per year to reach the break-even mark of their investment. If the number of students will exceed 1,000, the company will begin to earn.
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