A homeowner is considering buying a one-year fire insurance policy. They are told that there is a 0.7%chance that their house their house will burn down within the year, and it will cost $110,000.00to rebuild the house. They find a one-year full-coverage fire insurance policy for $1,100.00.

What is the expected value of this policy for the insurance company?

What is the expected value of this policy for the homeowner?