Avicenna, an insurance company, offers five-year commercial property insurance policies to small businesses. If the holder of one of these policies experiences property damage in the next five years, the company must pay out $26,500 to the policy holder. Executives at Avicenna are considering offering these policies for $497 each. Suppose that for each holder of a policy there is a 2% chance they will experience property damage in the next five years and a 98% chance they will not. (If necessary, consult a list of formulas.) If the executives at Avicenna know that they will sell many of these policies, should they expect to make or lose money from offering them? How much? To answer, take into account the price of the policy and the expected value of the amount paid out to the holder. Avicenna can expect to make money from offering these policies. In the long run, they should expect to makedollars on each policy sold. Avicenna can expect to lose money from offering these policies. In the long run, they should expect to losedollars on each policy sold Avicenna should expect to neither make nor lose money from offering these policies.
Avicenna, an insurance company, offers five-year commercial property insurance policies to small businesses. If the holder of one of these policies experiences property damage in the next five years, the company must pay out $26,500 to the policy holder. Executives at Avicenna are considering offering these policies for $497 each. Suppose that for each holder of a policy there is a 2% chance they will experience property damage in the next five years and a 98% chance they will not. (If necessary, consult a list of formulas.) If the executives at Avicenna know that they will sell many of these policies, should they expect to make or lose money from offering them? How much? To answer, take into account the price of the policy and the expected value of the amount paid out to the holder. Avicenna can expect to make money from offering these policies. In the long run, they should expect to makedollars on each policy sold. Avicenna can expect to lose money from offering these policies. In the long run, they should expect to losedollars on each policy sold Avicenna should expect to neither make nor lose money from offering these policies.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
Related questions
Question
Avicenna, an insurance company, offers five-year commercial property insurance policies to small businesses. If the holder of one of these policies experiences property damage in the next five years, the company must pay out
to the policy holder. Executives at Avicenna are considering offering these policies for
each. Suppose that for each holder of a policy there is a
chance they will experience property damage in the next five years and a
chance they will not.
(If necessary, consult a list of formulas.)
$26,500
$497
2%
98%
(If necessary, consult a list of formulas.)
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
Recommended textbooks for you
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman