Consider a community of 100 people, where each individual has $10,000 as a totalwealth. Total wealth of $10,000 includes the value of an individual's house whosemarket price is $5000. They are facing a probability that one of these houses willbe burned down.(a) Define a gamble using above scenarioNow assume you can buy insurance at $80, which pays you back $5000 in case ofburn down. (If nothing happens, you will end up spending $80 which isnonrefundable)(b) Is the gamble you defined in (a) a favorable gamble? Or unfavorable?(c) Calculate the fair insurance value

Given information: Number of people in the community = 100 people Wealth of each individual = $10000…

Answered: Consider a community of 100 people,…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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On the basis of his sale records, a salesman knows that his weekly commissions have the probabilities shown below. Commission 0 $1,000 $2,000 $3,000 $4,000 Probability 0.17 0.2 0.43 0.1 0.1 Find the salesman's expected commission.
Do you try to pad an insurance claim to cover your deductible? About 44% of all U.S. adults will try to pad their insurance claims! Suppose that you are the director of an insurance adjustment office. Your office has just received 126 insurance claims to be processed in the next few days. Find the following probabilities. (a) half or more of the claims have been padded (b) fewer than 45 of the claims have been padded (c) from 40 to 64 of the claims have been padded (d) more than 80 of the claims have not been padded
You are waiting tables on the side, in order to make rent. You pick up one shift (one day, determined at random) per week. Business is very predictable - on Mondays, 10 tables are occupied with patrons, on Tuesdays, 20 tables, Wednesdays 30 tables, 40 tables on Thursdays and 50 on Fridays. You can assume that you make $10 in tips per table. Your annual rent is $14,400. What is the probability that you are able to make rent from this job, this year? (assuming you work all 52 weeks without a vacation or break)?
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A realtor who takes the listing on a house to be sold knows that she will spend $800 trying to sell the house. If she sells it herself, she will earn 6% of the selling price. If another realtor sells a house from her list, the first realtor will earn only 3% of the price. If the house remains unsold after 6 months, she will lose the listing. Suppose that probabilities are as follows: Event Probability Sells the house alone 0.50 Sells through another agent 0.40 Does not sell in 6 months 0.10 What is the expected profit from listing a $185,000 house?
Diane has decided to play the following game of chance. She places a $1 bet on each repeated play of the game in which the probability of her winning $1 is .4. She has further decided to continue playing the game until she has either accumulated a total of $3 or has lost all her money. What is the probability that Diane will eventually leave the game a winner if she started with a capital of $1? Of $2? capital of $1 capital of $2
A man runs an ice cream parlour in a holiday resort. If the summer is mild he can sell 2500 cups of ice cream. If it is hot he can sell 4000 cups. If it is very hot he can sell 5000 cups. It is known that the Probability of any year summer to be mild is 1/7 hot is 4/7.A cup of ice cream costs $ 2 and is sold for $3.50. What is his expectation?

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