An insurance company estimates the probability of an earthquake in the next year to be 0.0013. They estimate the average damage done by an earthquake to be $60,000. The company offers earthquake insurance for $100 per year, and when damage occurs, the company pays the full price to the customer. Suppose you are working for the company and want to plan for their future finances. (a) What is the expected value of the insurance company’s payout to a customer in a year? $ equation editor Equation Editor (b) What is the expected value of the insurance company’s profit from each customer in a year?
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
An insurance company estimates the probability of an earthquake in the next year to be 0.0013. They estimate the average damage done by an earthquake to be $60,000. The company offers earthquake insurance for $100 per year, and when damage occurs, the company pays the full price to the customer. Suppose you are working for the company and want to plan for their future finances.
(a) What is the
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(b) What is the expected value of the insurance company’s profit from each customer in a year?
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