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Nezavi [6.7K]
3 years ago
9

It is estimated that there are 21 deaths for every 10 million people who use airplanes. A company that sells flight insurance pr

ovides $100,000 in case of death in a plane crash. A policy can be purchased for $1. Calculate the expected value and thereby determine how much the insurance company can make over the long run for each policy that it sells. The expected value is $1 (Round to the nearest cent.)
Mathematics
1 answer:
Yuki888 [10]3 years ago
4 0

Answer:

$0.79 profit per person who buys a policy

Step-by-step explanation:

For every 10 million people who buy a policy the expected outcome is

<em>$(21*100,000) = $2,100,000  (21 deaths out of 10 million)</em>

the expected income is  

$10,000,000  ($1 per sold policy)

So the <em>expected profit </em>is

$10,000,000 - $2,100,000 = $7,900,000

To obtain how much the insurance company can make for each policy that it sells, we <em>cross multiply </em>

10,000,000 people ---------> $7,900,000 profit

1 person   -----------------------> x

and

10,000,000=7,900,000/x and x = $0.79 profit per person who buys a policy

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