An insurance company sells a policy to airline passengers for $1. If a flyer dies on a given flight (from a plane crash), the policy gives $100,000 to the chosen beneficiary. Otherwise, there is no return. Records show that a passenger has about a one in a million chance of dying on any given flight. You buy a policy for your next flight.
a. Specify the probability distribution of the amount of money the beneficiary makes from your policy.
b. Find the mean of the probability distribution in part a. Interpret.
c. Explain why the company is very likely to make money in the long run.

  • CreatedSeptember 11, 2015
  • Files Included
Post your question