An insurance company sells policies for $1,000 each. Based on historical data, an average of 1 in 145 policyholders will file a $10,000 claim, an average of 1 in 235 policyholders will file a $50,000 claim, and an average of 1 in 320 policyholders will file a $85,000 claim, a) What is the company's expected payout per policy? $ (Round your answer to the nearest cent) b) What is the company's expected profit per policy? (Round your answer to the nearest cent) c) If the company also pays it's insurance agents a 15% commission per policy sold, then what is the company's expected total profit after selling 2,500 policies? million dollars (Note: answer is in millions) (Round your answer to the nearest tenth of a million, and enter a negative number for a loss)
An insurance company sells policies for $1,000 each. Based on historical data, an average of 1 in 145 policyholders will file a $10,000 claim, an average of 1 in 235 policyholders will file a $50,000 claim, and an average of 1 in 320 policyholders will file a $85,000 claim, a) What is the company's expected payout per policy? $ (Round your answer to the nearest cent) b) What is the company's expected profit per policy? (Round your answer to the nearest cent) c) If the company also pays it's insurance agents a 15% commission per policy sold, then what is the company's expected total profit after selling 2,500 policies? million dollars (Note: answer is in millions) (Round your answer to the nearest tenth of a million, and enter a negative number for a loss)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:An insurance company sells policies for $1,000 each. Based on historical data, an average of 1 in 145
policyholders will file a $10,000 claim, an average of 1 in 235 policyholders will file a $50,000 claim,
and an average of 1 in 320 policyholders will file a $85,000 claim,
a) What is the company's expected payout per policy?
$4
(Round your answer to the nearest cent)
b) What is the company's expected profit per policy?
(Round your answer to the nearest cent)
c) If the company also pays it's insurance agents a 15% commission per policy sold, then what is the
company's expected total profit after selling 2,500 policies?
million dollars
(Note: answer is in millions)
(Round your answer to the nearest tenth of a million, and enter a negative number for a loss)
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