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Exercise 8

Avg difficulty 2.5

An insurance company estimates the probability of a flood in the next year to be 0.0002. The average damage done by a flood is estimated to be $70,000. If the company offers flood insurance for $3000, what is their expected value of the policy?

Lee et al., Math in Society, §4.3 Expected Value, Exercise 8

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Adapted from Math in Society © 2018–2024 Portland Community College Math Instructors. Licensed under CC BY-SA 4.0. Source: Math in Society. Imported at revision 68ee43c.