Compute the expected value of y

Reference no: EM131762350

Question: Fire insurance Suppose a homeowner spends $300 for a home insurance policy that will pay out $200,000 if the home is destroyed by fire. Let Y = the profit made by the company on a single policy. From previous data, the probability that a home in this area will be destroyed by fire is 0.0002.

(a) Make a table that shows the probability distribution of Y.

(b) Compute the expected value of Y. Explain what this result means for the insurance company.

Reference no: EM131762350

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