Question 958072: A insurance company charges their clients $1400 annual premium. The company estimates that each time a patient that is hospitalized $2450. They estimated that 85% will not be hospitalized, 10% hospitalized once a yr and no one will be hospitalized more than twice.
what is the company expected profit and what is their profit for 30,000 clients?
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! A insurance company charges their clients $1400 annual premium. The company estimates that each time a patient that is hospitalized $2450. They estimated that 85% will not be hospitalized, 10% hospitalized once a yr and no one will be hospitalized more than twice.
what is the company expected profit and what is their profit for 30,000 clients?
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Random "profit" numbers::.....1400...-1050....-3500
Corresponding probabilities:: 0.85...0.10....0.05
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Expected "profit" = 0.85*1400 -0.10*1050 -0.05*3500 = $910.00
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Profit for 30,000 = 30000*910 = $27,300,000.00
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Cheers,
Stan H.
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