Math Problem Statement
Solution
To solve this problem, we need to determine the profit distribution, , for the insurance company, based on whether the woman lives or dies within the one-year policy period.
Step 1: Define Possible Outcomes for Profit
-
If the woman survives (probability = 0.9398):
- The insurance company only collects the premium, which is $2900.
- Therefore, the profit for the company is .
-
If the woman dies (probability = ):
- The insurance company pays $47,000 to her beneficiary.
- The profit in this case is .
Step 2: Create the Probability Distribution
The probability distribution of , the profit made by the insurance company, is as follows:
- Profit (X) = 2900 with
- Profit (X) = -44100 with
So, the distribution is:
\hline X & P(X) \\ \hline 2900 & 0.9398 \\ -44100 & 0.0602 \\ \hline \end{array}$$ Would you like additional details or have any questions? ### Related Questions: 1. How would the distribution change if the premium were different? 2. What is the expected profit for the insurance company based on this distribution? 3. How would changing the probability of survival affect the company’s profit distribution? 4. What would be the impact on the distribution if the payout amount was modified? 5. How does the concept of expected value apply to this problem? ### Tip: Understanding probability distributions is essential in assessing risks and expected outcomes in insurance and financial contexts.Ask a new question for Free
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Math Problem Analysis
Mathematical Concepts
Probability
Probability Distribution
Expected Value
Formulas
Expected Profit Formula: E(X) = Σ [X * P(X)]
Theorems
Basic Probability Theory
Suitable Grade Level
College or Advanced High School (Grades 11-12)
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