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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. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) Answer is complete and correct. Outcome: No Fire Payout Probability $ 220 Outcome: One Fire $ (99,780) 99.8000 % 0.1999 % Outcome: Two Fires $ (199,780) 0.0001 % d. What are the expected value, variance, and standard deviation of your profit? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) > Answer is complete but not entirely correct. Expected Variance Return Standard Deviation $ 20 7,976,900,938 x) 4,469 × Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $110, 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 $100,000. Required: a. Make a table of the two possible payouts on each policy with the probability of each. (Negative answers should be indicated with minus sign.) Payout Answer is complete and correct. $ Outcome A: No Fire Outcome B: Fire! 110 $ (99,890) 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? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) Answer is complete and correct. Expected Variance Return Standard Deviation $ 10 9,990,000 3,161

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. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) Answer is complete and correct. Outcome: No Fire Payout Probability $ 220 Outcome: One Fire $ (99,780) 99.8000 % 0.1999 % Outcome: Two Fires $ (199,780) 0.0001 % d. What are the expected value, variance, and standard deviation of your profit? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) > Answer is complete but not entirely correct. Expected Variance Return Standard Deviation $ 20 7,976,900,938 x) 4,469 × Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $110, 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 $100,000. Required: a. Make a table of the two possible payouts on each policy with the probability of each. (Negative answers should be indicated with minus sign.) Payout Answer is complete and correct. $ Outcome A: No Fire Outcome B: Fire! 110 $ (99,890) 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? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) Answer is complete and correct. Expected Variance Return Standard Deviation $ 10 9,990,000 3,161

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) Answer is complete and correct. Outcome: No Fire Payout Probability $ 220 Outcome: One Fire $ (99,780) 99.8000 % 0.1999 % Outcome: Two Fires $ (199,780) 0.0001 % d. What are the expected value, variance, and standard deviation of your profit? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) > Answer is complete but not entirely correct. Expected Variance Return Standard Deviation $ 20 7,976,900,938 x) 4,469 ×
Transcribed Image Text: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. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) Answer is complete and correct. Outcome: No Fire Payout Probability $ 220 Outcome: One Fire $ (99,780) 99.8000 % 0.1999 % Outcome: Two Fires $ (199,780) 0.0001 % d. What are the expected value, variance, and standard deviation of your profit? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) > Answer is complete but not entirely correct. Expected Variance Return Standard Deviation $ 20 7,976,900,938 x) 4,469 ×
Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $110, 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 $100,000. Required: a. Make a table of the two possible payouts on each policy with the probability of each. (Negative answers should be indicated with minus sign.) Payout Answer is complete and correct. $ Outcome A: No Fire Outcome B: Fire! 110 $ (99,890) 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? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) Answer is complete and correct. Expected Variance Return Standard Deviation $ 10 9,990,000 3,161
Transcribed Image Text:Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $110, 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 $100,000. Required: a. Make a table of the two possible payouts on each policy with the probability of each. (Negative answers should be indicated with minus sign.) Payout Answer is complete and correct. $ Outcome A: No Fire Outcome B: Fire! 110 $ (99,890) 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? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) Answer is complete and correct. Expected Variance Return Standard Deviation $ 10 9,990,000 3,161
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