Q3 3. An insurance policy sells for $720. Based on past data, an average of 1 in 70 policyholders will file a$10,000 claim, an average of 1 in 100 policyholders will file a $20,000 claim, and an average of 1 in400 policyholders will file a $50,000 claim.(a) What is the expected value to the company per policy sold?(b) What is the expected profit of selling 100,000 policies?4. Experience shows that a ski lodge will be full (162 guests) if there is a heavy snowfall in December,while only partially full (80 guests) with a light snowfall. What is the expected number of guests if theprobability for a heavy snowfall is 0.40? Assume that heavy snowfall and light snowfall are the only twopossibilities.

Expected value is used to measure the average of the probability distribution. It is calculated by…

3. An insurance policy sells for $720. Based on past data, an average of 1 in 70 policyholders will file a $10,000 claim, an average of 1 in 100 policyholders will file a $20,000 claim, and an average of 1 in 400 policyholders will file a $50,000 claim. (a) What is the expected value to the company per policy sold? (b) What is the expected profit of selling 100,000 policies?