An insurance policy sells for $1200. Based on past data, an average of 1 in 125 policy holders will file a $15000 claim, an average of 1 in 100 holders will file a claim of $40,000 and an average of 1 in 250 holders will file a claim of $80,000.
a) Find the expected value to the company of each policy sold.
b) If the company sells 10,000 policies what is the expected profit or loss?© BrainMass Inc. brainmass.com October 10, 2019, 5:21 am ad1c9bdddf
Here is my explanation:
a) For each policy, the profit = 1200 ...
This solution provides steps to find the expected value and expected profit or loss.