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?

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

Question

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?

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

Quizplus · Accepted Answer

Expected return = E(k) = Pr₁k₁ + Pr₂k₂ + ... + Pr_nk_n Expected return = 0.0001 × $200,000 + 0.001 × $50,000 + 0.02 × $2,000 + 0.9789 × $0 = $110Expected return = $110

A Home Insurance Company Anticipates the Following Pattern of Claims,based