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A Home Insurance Company Anticipates the Following Pattern of Claims

Question 7

Multiple Choice

A home insurance company anticipates the following pattern of claims, based on historical data. What is the expected claim on the next policy sold by the company?  Type of Claim 1234 Size of Claim $200,000$50,000$2,000$0Number of Claims out of10,000 Policy Holders1102009,789 Probability 0.00010.0010.020.9789\begin{array}{c}\begin{array}{|c|}\hline\\\\\\\text { Type of Claim }\\\hline1 \\\hline 2 \\\hline 3 \\\hline 4\\\hline\end{array}\begin{array}{c}\hline\\\\\\\text { Size of Claim }\\\hline \$ 200,000 \\\hline \$ 50,000 \\\hline \$ 2,000 \\\hline \$ 0\\\hline\end{array}\begin{array}{|c|} \hline \text {Number of}\\\text { Claims out of}\\\text {10,000 Policy }\\\text {Holders}\\\hline 1 \\\hline 10 \\\hline 200 \\\hline 9,789\\\hline \end{array}\begin{array}{c|}\hline\\\\\\\text { Probability } \\\hline 0.0001 \\\hline 0.001 \\\hline 0.02 \\\hline 0.9789\\\hline\end{array}\end{array}


A) $100
B) $110
C) $120
D) $130
E) $140

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