50. Insurance. An insurance company charges an annual pre- mium of $75 for a $200,000 insurance policy against a house burning down. If the (empirical) probability that a house burns down in a given year is .0003, what is the expected value of the policy to the insurance company?

College Algebra
10th Edition
ISBN:9781337282291
Author:Ron Larson
Publisher:Ron Larson
Chapter8: Sequences, Series,and Probability
Section8.7: Probability
Problem 4ECP: Show that the probability of drawing a club at random from a standard deck of 52 playing cards is...
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CTION 8.5 Random Variable, Probability Distribution, and Expected Value 451
48. A 3-card hand is dealt from a standard deck. You win $100
for each king in the hand. If the game is fair, how much
should you lose if the hand contains no kings?
bs. A random
e random
ve bulbs in a
lbs in a sample.
. Three tickets
t), and each will
mning tickets
u do not have
ave 1 winning
will not be
you?
ckets.
random integer
00; see
ates 200 games.
0
NOV
11
Applications
49. Insurance. The annual premium for a $5,000 insurance
policy against the theft of a painting is $150. If the (empiri-
cal) probability that the painting will be stolen during the
year .01, what is your expected return from the insurance
company if you take out this insurance?
50. Insurance. An insurance company charges an annual pre-
mium of $75 for a $200,000 insurance policy against a house
burning down. If the (empirical) probability that a house
burns down in a given year is .0003, what is the expected
value of the policy to the insurance company?
51. Decision analysis. After careful testing and analysis, an oil
company is considering drilling in two different sites. It is
estimated that site A will net $30 million if successful (prob-
ability .2) and lose $3 million if not (probability .8); site B
will net $70 million if successful (probability .1) and lose $4
million if not (probability .9). Which site should the company
choose according to the expected return for each site?
52. Decision analysis. Repeat Problem 51, assuming that ad-
ditional analysis caused the estimated probability of success.
tv
MacBook Pro
Transcribed Image Text:CTION 8.5 Random Variable, Probability Distribution, and Expected Value 451 48. A 3-card hand is dealt from a standard deck. You win $100 for each king in the hand. If the game is fair, how much should you lose if the hand contains no kings? bs. A random e random ve bulbs in a lbs in a sample. . Three tickets t), and each will mning tickets u do not have ave 1 winning will not be you? ckets. random integer 00; see ates 200 games. 0 NOV 11 Applications 49. Insurance. The annual premium for a $5,000 insurance policy against the theft of a painting is $150. If the (empiri- cal) probability that the painting will be stolen during the year .01, what is your expected return from the insurance company if you take out this insurance? 50. Insurance. An insurance company charges an annual pre- mium of $75 for a $200,000 insurance policy against a house burning down. If the (empirical) probability that a house burns down in a given year is .0003, what is the expected value of the policy to the insurance company? 51. Decision analysis. After careful testing and analysis, an oil company is considering drilling in two different sites. It is estimated that site A will net $30 million if successful (prob- ability .2) and lose $3 million if not (probability .8); site B will net $70 million if successful (probability .1) and lose $4 million if not (probability .9). Which site should the company choose according to the expected return for each site? 52. Decision analysis. Repeat Problem 51, assuming that ad- ditional analysis caused the estimated probability of success. tv MacBook Pro
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