SOLUTION: A company insures a coin collection worth $20,000 for an annual premium of $300. There is a .002 chance the collection will be stolen. What is the company's expected profit?

Question 505958: A company insures a coin collection worth $20,000 for an annual premium of $300. There is a .002 chance the collection will be stolen. What is the company's expected profit?
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
A company insures a coin collection worth $20,000 for an annual premium of $300. There is a .002 chance the collection will be stolen. What is the company's expected profit?
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Random profit values: -19700 ; +300
Corresponding probabilties: 0.002 ; 0.998
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Expected Profit = 0.002(-19700) + 0.998(300) = $260
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Cheers,
Stan H.
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