Engineering Board Exam Reviewer · Odds and Mathematical Expectation · medium
An insurer charges a premium of P2,000. There is a 2% chance of a claim of P50,000. Find the insurer's expected profit per policy.
- -P1,000
- P2,000
- P48,000
- P1,000
Answer
D. P1,000
Solution
E=2,000-0.02(50,000)=2,000-1,000=P1,000.
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