An insurance policy costs $120 and will pay policyholders $9,000 if they suffer a major injury (resulting in hospitalization) or $2500 if they suffer a minor injury (resulting in lost time from work). The company estimates that 1 in every 2021 policyholders will suffer a major injury and that 1 in 496 will suffer a minor injury. a) Create a probability model for the profit on a policy. b) What's the company's expected profit on the policy? c) What's the standard deviation? a) First find the probability and profit for each outcome. P(event) Profit no injury major injury minor injury

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An insurance policy costs $120 and will pay policyholders $9,000 if they suffer a major injury (resulting in hospitalization) or $2500 if they suffer a minor injury
(resulting in lost time from work). The company estimates that 1 in every 2021 policyholders will suffer a major injury and that 1 in 496 will suffer a minor injury.
a) Create a probability model for the profit on a policy.
b) What's the company's expected profit on the policy?
c) What's the standard deviation?
a) First find the probability and profit for each outcome.
P(event)
Profit
no injury
major injury
minor injury
(Round to six decimal places as needed.)
Transcribed Image Text:An insurance policy costs $120 and will pay policyholders $9,000 if they suffer a major injury (resulting in hospitalization) or $2500 if they suffer a minor injury (resulting in lost time from work). The company estimates that 1 in every 2021 policyholders will suffer a major injury and that 1 in 496 will suffer a minor injury. a) Create a probability model for the profit on a policy. b) What's the company's expected profit on the policy? c) What's the standard deviation? a) First find the probability and profit for each outcome. P(event) Profit no injury major injury minor injury (Round to six decimal places as needed.)
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