Suppose the premium of a home insurance policy is $18,000 per year and in case of a fire the insurance company will pay out $250,000. The probability of a fire is 0.007. Find the expected value for the insurance company. (you can assume 1 year) Don't forget probabilities must sum to 1 the $18,000 is payment to insurance company for 1 year . the $250,000 is paid by the insurance company . . $16.124 O $-250,000 O $10,600 O $188,000

Suppose the premium of a home insurance policy is $18,000 per year and in case of a fire the insurance company will pay out $250,000. The probability of a fire is 0.007. Find the expected value for the insurance company. (you can assume 1 year) Don't forget probabilities must sum to 1 the $18,000 is payment to insurance company for 1 year . the $250,000 is paid by the insurance company . . $16.124 O $-250,000 O $10,600 O $188,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4P

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