Mathematics
Mathematics, 19.11.2019 01:31, marchellepenuliar

An insurance company looks at the records for millions of homeowners and conclude the probability of fire in a year is 0.01 for each house and the loss should a fire occur is $10,000. thus the expected loss from fire for each house is $100. assume the fires are independent. the company plans to sell fire insurance for $120 (which is the expected loss plus s20). if a house owner purchases the insurance and his/her house catches fire, the company will cover for the loss (a) if the company sells the insurance policy to 10 houses, what is the expected total profit of the company (b) compute the probability of bankruptcy for the company, that is, when total profit is negative (c) use the central limit theorem to approximately compute the probability of bankruptcy if the company sells the policy to1 llion houses.

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