A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN: 9780134753119
Author: Sheldon Ross
Publisher: PEARSON
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3. An insurance policy sells for $720. Based on past data, an average of 1 in 70 policyholders will file a
$10,000 claim, an average of 1 in 100 policyholders will file a $20,000 claim, and an average of 1 in
400 policyholders will file a $50,000 claim.
(a) What is the expected value to the company per policy sold?
(b) What is the expected profit of selling 100,000 policies?
4. Experience shows that a ski lodge will be full (162 guests) if there is a heavy snowfall in December,
while only partially full (80 guests) with a light snowfall. What is the expected number of guests if the
probability for a heavy snowfall is 0.40? Assume that heavy snowfall and light snowfall are the only two
possibilities.
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Transcribed Image Text:3. An insurance policy sells for $720. Based on past data, an average of 1 in 70 policyholders will file a $10,000 claim, an average of 1 in 100 policyholders will file a $20,000 claim, and an average of 1 in 400 policyholders will file a $50,000 claim. (a) What is the expected value to the company per policy sold? (b) What is the expected profit of selling 100,000 policies? 4. Experience shows that a ski lodge will be full (162 guests) if there is a heavy snowfall in December, while only partially full (80 guests) with a light snowfall. What is the expected number of guests if the probability for a heavy snowfall is 0.40? Assume that heavy snowfall and light snowfall are the only two possibilities.
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