document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1040073>Question 1040073</A>: <I><SPAN STYLE=\"word-break: break-all;\">  I need help with this one,\r<BR>\n" );
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document.write( "Thanks,\r<BR>\n" );
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document.write( "Insurance I.  Suppose a company charges an annual premium of $500 for a fire insurance policy.  In case of a fire claim, the company will pay out an average of $100,000.  Based on actuarial studies, it determines that the probability of a fire claim in a year is 0.004.\r<BR>\n" );
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document.write( "What is the expected annual profit of a fire insurance policy for the company?\r<BR>\n" );
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document.write( " (Fill in the blank below and give your answer as a whole number.) \r<BR>\n" );
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document.write( "The expected annual profit per policy is $.\r<BR>\n" );
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document.write( "What annual profit can the company expect if it issues 1000 policies?\r<BR>\n" );
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document.write( "(Fill in the blank below and give your answer as a whole number.)\r<BR>\n" );
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document.write( "The expected annual profit if it issues 1000 policies is $.<BR>\n" );
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document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #654877 by </B><A HREF=/tutors/aboutme.mpl?userid=Boreal><B>Boreal(15235)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Boreal><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Boreal><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=654877\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> E(x)=x*p(x)<BR>\n" );
document.write( "+ side is 500*0.996, which is probability nothing will happen.<BR>\n" );
document.write( "That is $498<BR>\n" );
document.write( "- side is a claim, which is 100,000*0.004=$400<BR>\n" );
document.write( "The average profit is $98 on each policy sold.<BR>\n" );
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document.write( "One would expect a profit of $98000 for 1000 policies.<BR>\n" );
document.write( "Let's look at expected value<BR>\n" );
document.write( "500*996=498,000<BR>\n" );
document.write( "minus 4 fires at $100,000 each, which is $400,000.  The profit is the difference, or $98,000 </SPAN>\n" );
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