Car thieves steal one automobile out of 400 of a certain type every year in a certain city. What annual net premium should an owner pay for theft insurance in the amount of $16,000 on the certain type of car? A. $16 B. $40 C. $400 D. $4

Without including other expenses and the benefit of the insurance company, the premium has to meet this proportion:

1/400 = premim / value of the car

=> 1/400 = premum / $16,000

=> premium = $16,000 * (1/400) = $ 40

As already said this is witout taking into consideration the other expenses of the insurance company and their margin.

Answer: option B. $40.