Question

Whitewater Rapids provides canoes to tourists eager to ride Whitewater river's rapids. Management has determined that there is one chance in a thousand of a customer being injured or killed. Settlement of resulting lawsuits has an average cost of $850,000. Insurance with a $100,000 deductible is available. It covers the costs of lawsuits, unless there is evidence of criminal negligence. What is the expected loss with insurance?

A) $100
B) $850
C) $100,000
D) $850,000

Answer 1

The expected loss with insurance is $100,000

Step-by-step explanation:

The expected loss with insurance is $100,000 because this is the value of the deductible. If Whitewater Rapids doesn´t take out the insurance, the loss would be for the total cost of lawsuits.

The values of $100 and $850 make no sense.