Question

Oxnard Petro Ltd. is buying hurricane insurance for its off-coast oil drilling platform. During the next five years, the probability of total loss of only the above-water superstructure ($330 million) is .35, the probability of total loss of the facility ($830 million) is .35, and the probability of no loss is .30.
Find the expected loss. (Input the amount as a positive value.)

What is Expected Loss ___ $ million???

Answer 1

Answer:

$406,000,000

Step-by-step explanation:

Given that:

During the next five years;

the probability of total loss of only the above-water superstructure ($330 million) = .35

the probability of total loss of the facility ($830 million) = .35

the probability of no loss = .30

The Expected loss is being calculated by using the summation of both the  total loss amount with their corresponding probability of loss

i.e

Expected Loss = Σ ($ 330,000,000 × .35) + ($ 830,000,000 × .35)

Expected Loss = $ 115,500,000 + $ 290,500,000

Expected Loss = $ 406,000,000