Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $310, 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 $300,000. a. Make a table of the two possible payouts on each policy with the probability of each. Outcome A: No Fire Outcome B: Fire! Payout b. Suppose you own the entire firm, and the company issues only one polley. What are the expected value, variance and standard deviation of your profit? Expected Return Variance Standard Deviation 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 the associated probabilities. (Round your "Probability answers to 4 decimal places.) OU Outcome: No Fire Outcom One Fine Two Fires Payout Probability d. What are the expected value, variance and standard deviation of your profit? d. What are the expected value, variance and standard deviation of your profit? Expected Vrance Standard Deviation Retum Compare your answers to (b) and (a). Did risk pooling Increase or decrease the variance of your profit? Rink pooling TH the total variance of prot. 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 decimal places.) Outcome: No Fire Outcomes One Fine Outcome: Two Fires Payout g. What are the expected value and variance of your profit? g. What are the expected value and variance of your profit? Expected Variance Standard Deviation