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Discrete probability When all factors are taken into account, an insurance company estimates that the probability of the owners’ of certain house making a claim for $\$5000$ is $0.1$. Furthermore the company estimates the probability of a $\$450,000$ claim( total loss of the home) is $0.005$. Let $X$ represent the dollar amount the company will pay on a claim in a given year. What values can $X$ take on?

I just want to know if I’m doing this correctly all I would do is add to find the $x$ right which would look like $5000(0.1)+450,000(0.005)=2750$

mathematics2x2life
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Linda
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1 Answers1

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You have correctly calculated the expected value the company will pay out. That is not what the question asks, though it is what the title asks. The question asks what amounts the company might pay. There should be three or four of them. I don't think the question is clear whether one of them is possible.

Ross Millikan
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