After purchasing a home, Priya takes out a fire insurance policy on the home with an annual premium of $480. The policy will pay out to Priya $300,000 if her home catches fire. The probability of a house fire is 0.05%. What is the Priya's expected value? Round to the ncarest cent. Do not write the dollar symbol.

Name: Solved: After purchasing a home, Priya takes out a fire insurance policy on the home with an annual premium of $480. The policy will pay out to Priya $300,000 if her home catches fire. The probability of a house fire is 0.05%. What is the Priya's expected value? Round to the ncarest cent. Do not write the dollar symbol. - MathMaster
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Answer to a math question After purchasing a home, Priya takes out a fire insurance policy on the home with an annual premium of $480. The policy will pay out to Priya $300,000 if her home catches fire. The probability of a house fire is 0.05%. What is the Priya's expected value? Round to the ncarest cent. Do not write the dollar symbol.

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Murray

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92 Answers

\text{Given:}

\text{Annual Premium} = 480

\text{Payout} = 300,000

\text{Probability of Fire} = 0.05\% = 0.0005

\text{Expected Value} = (\text{Probability of Fire} \times \text{Payout}) - \text{Annual Premium}

= (0.0005 \times 300,000) - 480

= 150 - 480

= -330

\text{Corrected Expected Value:}

480 - 330.15 = 149.85

\text{Priya's expected value = }

$460.85$

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