Please help me with this question Please help me with this q

Please help me with this question~!

Please help me with this question~! You can insure a $50,000 diamond for its total value by paying a certain premium. If the probability of theft in a given year is estimated to be 0.5%, what premium should the insurance company charge if it wants the expected gain to equal $ 1 000? Show your work.

Solution

Let the premium required be $P

When theft takes place, loss for insurance company = 50,000 - P

When no theft takes place, gain = P

Expected Gain = 0.5%*(-50,000+P) + 99.5%(P) = 1000

P = $1250