Answer You're a small insurance company that insures 5000 people. Let's say that 1 housewill catch on fire per year, so the probability of a house catching on fire is (1/5000).Therefore, the probability of a house NOT catching on fire is (4999/5000). If a housecatches on fire, you have to pay $200,000. If every person pays $25 monthly, howmuch profit will your business make?$259.94$1,299,700$75,000$3,673

Given:5000 people insured.Probability of a house catching on fire is 1/5000.Payment in case of a house fire is $200,000.Each person pays $25 monthly.Calculate annual revenue from premiums:Each person pays $25 per month, which is $25 * 12 = $300 per year.Total annual premium revenue is $300 * 5000 = $1,500,000.Calculate the expected annual payout in case of a house fire:The probability of a house catching on fire is 1/5000.Expected payout per house fire is (1/5000) * $200,000 = $40.Calculate the annual profit:Subtract the expected annual payout from the annual premium revenue: $1,500,000 - $40 = $1,499,960.So, the annual profit for your insurance company is $1,499,960.It appears that there was an error in the options provided, and the closest option to the correct answer is not available.