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What is the expected value of keeping the basic insurance

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Reference no: EM132672674

Problem 1: Suppose your house is worth $1,000,000 and you have basic fire insurance that costs $50 per year. The insurance has a maximum coverage of $200,000. There is a 0.1% chance every year that your house will burn down and lose all its value. What is the expected value of keeping the basic insurance (instead of buying more insurance)?

Reference no: EM132672674

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