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    Values of a Policy

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    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?

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    Solution Preview

    Hi there,

    Here is my explanation:

    a) For each policy, the profit = 1200 ...

    Solution Summary

    This solution provides steps to find the expected value and expected profit or loss.