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event of a fire, the insured damages (the payout on the policy) will be $340,000. lake a table of the two possible payouts on each policy with the probability of each. out Outcome A: Outcome B: No Fire Fire! pected Return $ uppose you own the entire firm, and the company issues only one policy. What are the expected value, varlance and standard lation of your profit? O Variance Standard Deviation

event of a fire, the insured damages (the payout on the policy) will be $340,000. lake a table of the two possible payouts on each policy with the probability of each. out Outcome A: Outcome B: No Fire Fire! pected Return $ uppose you own the entire firm, and the company issues only one policy. What are the expected value, varlance and standard lation of your profit? O Variance Standard Deviation

A First Course in Probability (10th Edition)
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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Neighborhood Insurance sells fire Insurance policies to local homeowners. The premium is $350, the probability of a fire is 0.1%, and in the event of a fire, the insured damages (the payout on the policy) will be $340,000. a. Make a table of the two possible payouts on each policy with the probability of each. Payout Expected Return $ 10 b. Suppose you own the entire firm, and the company issues only one policy. What are the expected value, variance and standard deviation of your profit? Payout Probability Outcome A No Fire $ Expected Return $ Variance 20 c. Now suppose your company issues two policies. The risk of fire Is Independent across the two policies. Make a table of the three possible payouts along with their associated probabilities. (Round your "Probability" answers to 4 decimal places.) O Outcome: No Fire Outcome B Fire! Variance Standard Deviation 96 Outcome: One Fire d. What are the expected value, variance and standard deviation of your profit? 96 Standard Deviation Outcome: Two Fires %
Transcribed Image Text:Neighborhood Insurance sells fire Insurance policies to local homeowners. The premium is $350, the probability of a fire is 0.1%, and in the event of a fire, the insured damages (the payout on the policy) will be $340,000. a. Make a table of the two possible payouts on each policy with the probability of each. Payout Expected Return $ 10 b. Suppose you own the entire firm, and the company issues only one policy. What are the expected value, variance and standard deviation of your profit? Payout Probability Outcome A No Fire $ Expected Return $ Variance 20 c. Now suppose your company issues two policies. The risk of fire Is Independent across the two policies. Make a table of the three possible payouts along with their associated probabilities. (Round your "Probability" answers to 4 decimal places.) O Outcome: No Fire Outcome B Fire! Variance Standard Deviation 96 Outcome: One Fire d. What are the expected value, variance and standard deviation of your profit? 96 Standard Deviation Outcome: Two Fires %
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