Question 1183778
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 I am confused on how to set up the equation to find the answer. Please help.
Find the expected value.
A trip insurance policy pays $1000 to the customer in case of a loss due to theft 
or damage on a four-day trip. If the risk of such a loss is assessed to be 1 in 250, 
what is a fair premium (the company's expected cost per customer) for this policy?
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<pre>
My background is not from Finance, but I have a common sense, instead.


The loss happens in one case from 250.


Then the company pays $1000 to the customer.


In other words, it pays  {{{1000/250}}} = 4 dollars to each customer, in average.


These 4 dollars is the answer to the problem's question.




        The equation to setup is  4 = {{{(1/250)*1000}}}.

        {{{1/250}}}  is the probability of the loss.
</pre>

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"Fair premium" in this case means that the company works at no profit and without processing fees 
and without paying salary to its coworkers, i.e. on a voluntary basis . . . (exactly as the tutors at this forum . . . )


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To get the knowledge on the subject "Expected value", read from these Internet sources


https://en.wikipedia.org/wiki/Expected_value


https://www.investopedia.com/terms/e/expected-value.asp