What is the expected value

Answered question

2021-12-16

An insurance policy sells for $600 based on past data an average of one and 50 policyholders go file a $10,000 claim an average of one and 250 policyholders will file A $30,000 claim an average of one and 400 policyholders will file an $80,000 claim find the expected value to the company per policy sold and if the company sells 10,000 policies what is the expected profit or loss

Answer & Explanation

karton

karton

Expert2022-02-14Added 613 answers

 As given in the question:
The selling price of an insurance policy = $600
The number of polices sells by the company= 10,000
Therefore the total selling orice of 10.000 nolices=

=$600×10,000

=$6,000,000

The total claim by the policyholders =

=((150×10,000)+(1250×30,000)+(1400×80,000))×10,000

=(200+120+200)×10,000

=520×10,000

=$5,200,000

The expected profit to the company:
=6,000,0005,200,000

=$800,000

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