Question

Part A An insurance company initially is insuring a pool of 200 people, each of whom has a 5% chance of a $10,000 loss due to illness. Answer the following questions based on this information, plus any additional information provided. (I.) How many people does the insurer expect to file a claim for the $10,000, and what will be the total dollar amount of all those claims combined? Group of answer choices a. 20 people, for a total of $200,000 in claims. b. 10 people, for a total of $50,000 in claims. c. 10 people, for a total of $100,000 in claims. d. 5 people, for a total of $25,000 in claims

Answer 1

The company is insuring 200 people, and they have a 5% chance of being ill. This translates to

5%*200=10.

The company expects 10 people to be ill.

Now, whenever someone falls ill, the company expects them to claim $10000 loss. Since there are 10 people, the total amount would be

10*10000=$100,000.

Hence, the correct answer is C- 10 people, for a total of $100,000 in claims.