Question

The annual premium for a ​$ 15 comma 000 15,000 insurance policy against the theft of a painting is ​$ 300 300. If the​ (empirical) probability that the painting will be stolen during the year is 0 . 03 .03​, what is your expected return from the insurance company if you take out this​ insurance?

Answer 1

Answer:

P(x)=0.97

E(x)=$150

Step-by-step explanation:

The expected return from the insurance company if the I nsurance is taken out will be:

A.Let assume x is the random variable for the amount received from the Insurance company.

Therefore:

x =$300-$0

=$300-$15,000

P(x)=1-0.03=0.97

P(x)=0.03

B.

E(x)=0.97×$300-$14,700×0.03

=$291-$441

=$150