An insurance company knows that the average cost to build a home in a new California subdivision is $97,656 and that in any particular year there is a 1 in 51 chance of a wildfire destroying all the homes in the subdivision. Based on these data and assuming the insurance company wants a positive expected value when it sells policies, what is the minimum the company must charge for fire insurance policies in this subdivision? A) The company must charge $97,656 per year because the whole house will be destroyed in the event of a wildfire. B) The company must charge $1915 per year because the company's formula for yearly fees is the average cost divided by the chance of a wildfire. C) The company must charge $51 per year because there is a 1 in 51 chance of a wildfire each year. D) The company must charge $1915 per year because this is the expected value. E) The company must charge $51 per year because this is the expected value. F) The company must charge $97,656 per year because this is the expected value.
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 knows that the average cost to build a home in a new California subdivision is $97,656 and that in any particular year there is a 1 in 51 chance of a wildfire destroying all the homes in the subdivision. Based on these data and assuming the insurance company wants a positive
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