The David Derrick Insurance company wants to sells a certain policy for $1000 to John Graham...

  

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The David Derrick Insurance company wants to sells a certain policy for $1000 to John Graham Jr. They know from historic data that there is a 1 in 100 chance John will file a $20,000 claim, a 1 in 200 chance John will file a $50,000 claim, a 1 in 500 chance John will file a $100,000 claim. Define the random variable X where Xthe insurance company's profit for each policy sold. 1. Compute the expected value of X. Interpret this number as either profit/loss for the insurance company. 2. Estimate how much the company stands to make/lose if they sell 1000 policies. The David Derrick Insurance company wants to sells a certain policy for $1000 to John Graham Jr. They know from historic data that there is a 1 in 100 chance John will file a $20,000 claim, a 1 in 200 chance John will file a $50,000 claim, a 1 in 500 chance John will file a $100,000 claim. Define the random variable X where Xthe insurance company's profit for each policy sold. 1. Compute the expected value of X. Interpret this number as either profit/loss for the insurance company. 2. Estimate how much the company stands to make/lose if they sell 1000 policies.