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I need help with the blanks ! Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $130, the probability of a fire
I need help with the blanks !
Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $130, the probability of a fire is 0.1%, and in the event of a fire, the insured damages (the payout on the policy) will be $120,000. a. Make a table of the two possible payouts on each policy with the probability of each. Outcome A: No Fire $ 130 Outcome B: Fire! $ (119,870) Payout c. Now suppose your company issues two policies. The risk of fire is independent across the two policies. Make a table of the three possible payouts along with their associated probabilities. (Round your "Probability" answers to decimal places.) Outcome: No Fire $ 260 Outcome: One Fire Payout Probability $ (119,740) 0.1999 % Outcome: Two Fires $ (239,740) 0.0000 % 99.8000 % d. What are the expected value, variance and standard deviation of your profit? Expected Return Variance Standard Deviation $ 20 f. Continue to assume the company has issued two policies, but now assume you take on a partner, so that you each own one-half of the firm. Make a table of your share of the possible payouts the company may have to make on the two policies, along with their associated probabilities. (Round your "Probability" answers to 4 decimal places.) Outcome: No Fire Outcome: One Fire Outcome: Two Fires $ 130 Payout Probability % % g. What are the expected value and variance of your profit? Expected Return Variance Standard Deviation Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $130, the probability of a fire is 0.1%, and in the event of a fire, the insured damages (the payout on the policy) will be $120,000. a. Make a table of the two possible payouts on each policy with the probability of each. Outcome A: No Fire $ 130 Outcome B: Fire! $ (119,870) Payout c. Now suppose your company issues two policies. The risk of fire is independent across the two policies. Make a table of the three possible payouts along with their associated probabilities. (Round your "Probability" answers to decimal places.) Outcome: No Fire $ 260 Outcome: One Fire Payout Probability $ (119,740) 0.1999 % Outcome: Two Fires $ (239,740) 0.0000 % 99.8000 % d. What are the expected value, variance and standard deviation of your profit? Expected Return Variance Standard Deviation $ 20 f. Continue to assume the company has issued two policies, but now assume you take on a partner, so that you each own one-half of the firm. Make a table of your share of the possible payouts the company may have to make on the two policies, along with their associated probabilities. (Round your "Probability" answers to 4 decimal places.) Outcome: No Fire Outcome: One Fire Outcome: Two Fires $ 130 Payout Probability % % g. What are the expected value and variance of your profit? Expected Return Variance Standard DeviationStep by Step Solution
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