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6 March, 21:12

The annual premium for a $ 15 comma 000 15,000 insurance policy against the theft of a painting is $ 300 300. If the (empirical) probability that the painting will be stolen during the year is 0. 03.03 , what is your expected return from the insurance company if you take out this insurance?

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  1. 6 March, 21:26
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    P (x) = 0.97

    E (x) = $150

    Explanation:

    The expected return from the insurance company if the I nsurance is taken out will be:

    A. Let assume x is the random variable for the amount received from the Insurance company.

    Therefore:

    x = $300-$0

    =$300-$15,000

    P (x) = 1-0.03=0.97

    P (x) = 0.03

    B.

    E (x) = 0.97*$300-$14,700*0.03

    =$291-$441

    =$150
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