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Create a probability model for the profit on a policy

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Reference no: EM131648207

Question: Insurance. An insurance policy costs $100 and will pay policyholders $10,000 if they suffer a major injury (resulting in hospitalization) or $3000 if they suffer a minor injury (resulting in lost time from work). The company estimates that each year 1 in every 2000 policyholders may have a major injury, and 1 in 500 a minor injury only.

a) Create a probability model for the profit on a policy.

b) What's the company's expected profit on this policy?

c) What's the standard deviation?

Reference no: EM131648207

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