| Car Rental |
| Scenario 1 |
| Insurance cost | $10 |
| Minor accident | $ 1,500 |
| Major accident | $ 15,000 |
| No accident | Minor accident | Major Accident | Expected Value |
| Take insurance | ($10) | ($10) | ($10) | $ (10.00) |
| Decline insurance | $ - 0 | $ (1,500) | $ (15,000) | $ (9.90) |
| Probability | 99.79% | 0.16% | 0.05% |
| Based on the above calculation, what is the best value decision? What would you do? Explain! |
| How would you evaluate the risk involved in this scenario? Explain! |
| Scenario 2 |
| Insurance cost | $15 |
| Minor accident | $ 2,500 |
| Major accident | $ 25,000 |
| No accident | Minor accident | Major Accident | Expected Value |
| Take insurance | ($15) | ($15) | ($15) | $ (15.00) |
| Decline insurance | $ - 0 | $ (2,500) | $ (25,000) | $ (16.50) |
| Probability | 99.79% | 0.16% | 0.05% |
| Based on the above calculation, what is the best value decision? What would you do? Explain! |
| How would you evaluate the risk involved in this scenario? Explain! |
LARA-G
CarRental.xlsx
