An engineer decided to make a careful analysis ofthe cost
Chapter , Problem 10-46(choose chapter or problem)
An engineer decided to make a careful analysis ofthe cost of fire insurance for his $200,000 home.From a fire rating bureau he found the follow-ing risk of fire loss in any year.Outcome ProbabilityNo fire loss 0.986$ 10,000 fire loss 0.01040,000 fire loss 0.003200,000 fire loss 0.001(a)Compute his expected fire loss in any year.(b)He finds that the expectedfire loss in any yearisless than the $550 annual cost of fire insurance.In fact, an insurance agent explains that thisis always true. Nevertheless, the engineer buysfire insurance. Explain why this is or is not alogical decision.
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