document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1177075>Question 1177075</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Acasa Insurance Company offers several plans for home insurance.\r<BR>\n" );
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document.write( "Plan A has a $700 yearly premium with a $3,000 deductible.<BR>\n" );
document.write( "Plan B has a $1,200 yearly premium with a $1,000 deductible.<BR>\n" );
document.write( "Water damage (from broken pipes, overflows, etc.) results in approximately 12% of claims overall, with an average claim being $5,200. What is the expected value (loss or gain) to Acasa for every customer who chooses plan A?\r<BR>\n" );
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document.write( "A. -$1,060<BR>\n" );
document.write( "B. $436<BR>\n" );
document.write( "C. -$360<BR>\n" );
document.write( "D. -$100\r<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 #850527 by </B><A HREF=/tutors/aboutme.mpl?userid=CPhill><B>CPhill(1959)</B></A><img src=\"/images/stars/stars-12.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=CPhill><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=CPhill><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=850527\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> Here's how to calculate the expected value for Acasa Insurance Company for Plan A:\r<BR>\n" );
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document.write( "**1. Calculate the Expected Claim Payout**\r<BR>\n" );
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document.write( "* **Probability of Water Damage:** 12% or 0.12<BR>\n" );
document.write( "* **Average Claim Amount:** $5,200<BR>\n" );
document.write( "* **Deductible:** $3,000<BR>\n" );
document.write( "* **Payout per Claim:** $5,200 - $3,000 = $2,200 (since the average claim exceeds the deductible)<BR>\n" );
document.write( "* **Expected Claim Payout:** 0.12 * $2,200 = $264\r<BR>\n" );
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document.write( "**2. Calculate the Expected Value**\r<BR>\n" );
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document.write( "* **Yearly Premium:** $700<BR>\n" );
document.write( "* **Expected Claim Payout:** $264<BR>\n" );
document.write( "* **Expected Value (Acasa's Gain):** $700 - $264 = $436\r<BR>\n" );
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document.write( "**Therefore, the expected value to Acasa for every customer who chooses Plan A is $436.**\r<BR>\n" );
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document.write( "The correct answer is **B. $436**.<BR>\n" );
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