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Fire insurance Suppose a homeowner spends $300 for a home insurance policy that will pay
Chapter 6, Problem 10(choose chapter or problem)
Fire insurance Suppose a homeowner spends $300 for a home insurance policy that will pay out $200,000 if the home is destroyed by fire. Let Y = the profit made by the company on a single policy. From previous data, the probability that a home in this area will be destroyed by fire is 0.0002.
(a) Make a table that shows the probability distribution of Y.
(b) Compute the expected value of Y. Explain what this result means for the insurance company
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QUESTION:
Fire insurance Suppose a homeowner spends $300 for a home insurance policy that will pay out $200,000 if the home is destroyed by fire. Let Y = the profit made by the company on a single policy. From previous data, the probability that a home in this area will be destroyed by fire is 0.0002.
(a) Make a table that shows the probability distribution of Y.
(b) Compute the expected value of Y. Explain what this result means for the insurance company
ANSWER:Step 1 of 3
Given:
A home insurance policy charges $300 from the owner. The homeowner will pay out $200,000 if the home is destroyed in a fire. Y denotes the profit made by the insurance company on a single policy.
The probability that a home will be destroyed in a fire is equal to 0.0002.
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Review this written solution for 1055634) viewed: 435 isbn: 9781464108730 | The Practice Of Statistics - 5 Edition - Chapter 6.1 - Problem 10
Thank you for your recent purchase on StudySoup. We invite you to provide a review below, and help us create a better product.
No thanks, I don't want to help other students