Based on the previous year's data, an insurance company is predicting they will have to make the following payouts (cost to the company) next year:
Date
Chapter 70 Classwork
.
an average of 1 in 50 policyholders will file a $5,000 claim
an average of 1 in 100 policyholders will file a $10,000 claim
an average of 1 in 200 policyholders will file a $30,000 claim
1. What is the expected PAYOUT (or COST) of the claims to the company per policy sold? Show all relevant
work. Use appropriate units and rounding for your value. Write
your answer in a complete sentence in the
context of the problem by filling in the blanks and using appropriate units and rounding for your value.
The expected
is
2. If the company sells each policy for $500 and sells a total of 15,000 policies, what is the expected
PROFIT for next year? Show all relevant work. Write your answer in a complete sentence in the context of
the problem by filling in the blanks and using appropriate units and rounding for your value.
The expected