A man won

$5

million by scoring

17

goals in

27

seconds in a contest at a sports game that was sponsored by a business. Did the business risk the

$5

million

? No! The business purchased event insurance from a company specializing in promotions at sporting events. The event insurance company estimates the probability of a contestant winning the contest and, for a modest charge, insures the event. The promoters pay the insurance premium but take on no added risk as the insurance company will make the large payout in the unlikely event that a contestant wins. To see how it works, suppose that the insurance company estimates that the probability a contestant would win the contest is

0.0023

and that the insurance company charges

$25,000.

Complete parts (a) and (b).

Question content area bottom

Part 1

a. Calculate the expected value of the profit made by the insurance company.

$enter your response here

Answer rating: 100% (QA)

To calculate the expected value of the profit made by the insurance c... View the full answer