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An insurance policy sells for ​$600.Based on past​ data, an average of 1 in 125 policyholders wil...

An insurance policy sells for ​$600.Based on past​ data, an average of 1 in 125 policyholders will file a​ $10,000 ​claim, an average of 1 in 250 policy holders will file a

$40,000 ​claim, and an average of 1 in 500 policyholders will file a ​$60,000 claim. Find the expected value​ (to the​ company) per policy sold. If the company sells 20,000

​policies, what is the expected profit or​ loss?

math   Statistics-And-Probability   
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Answer #1

expected value​ (to the​ company) per policy sold =600-(1/125)*10000-(1/250)*40000-(1/500)*60000=$240

expected profit for selling 20000 policies =20000*240=4800000

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