Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help Neighborhood Insurance sells fire Insurance policies to local homeowners. The premium is $210, the probability of a fire is 0.2%, and in the

Please help image text in transcribed
Neighborhood Insurance sells fire Insurance policies to local homeowners. The premium is $210, the probability of a fire is 0.2%, and in the event of a fire, the insured damages (the payout on the policy) will be $101,800. a. Suppose you own the entire firm, and the company issues only one policy. What are the expected payout, expected profit, variance and standard deviation of your scenario? (Enter all answers in dollars, rounded to 2 decimal places. Round Profit to the nearest whole dollar.) Payouts on one policy Expected Payout Profit Payout Variance Payout Standard Deviation b. Now suppose your company issues two policies. The risk of fire is independent across the two policies. Make a table of the payout and profit, along with their associated variances and standard deviations (Enter all answers in dollars, rounded to 2 decimal places. Round Profit to the nearest whole dollar) Total payouts when two policies have been issued Expected Payout Profit Payout Variance Payout Standard Deviation

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Applications and Theory

Authors: Marcia Cornett, Troy Adair

3rd edition

1259252221, 007786168X, 9781259252228, 978-0077861681

More Books

Students also viewed these Finance questions

Question

=+ e. What happens to Oceanias real exchange rate?

Answered: 1 week ago