Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $290, the probability...
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Accounting
Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $290, 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 $280,000.
1. 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. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) 2. What are the expected value, variance, and standard deviation of your profit? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.)
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