An insurance policy sells for $790. Based on past data, an average of 1 in 80 policyholders will file a $10,000 claim, an average of 1 in 140 policyholders will file a $20,000 claim, and an average of 1 in 300 policyholders will file a $50,000 claim. What is the expected value to the company per policy sold?
A) $385
B) $377
C) $355
D) $435

Question

An insurance policy sells for $790. Based on past data, an average of 1 in 80 policyholders will file a $10,000 claim, an average of 1 in 140 policyholders will file a $20,000 claim, and an average of 1 in 300 policyholders will file a $50,000 claim. What is the expected value to the company per policy sold?
A) $385
B) $377
C) $355
D) $435

anonymous · Answer

790 - 10000 / 80 + 20000 / 140 + 50000 / 300= approximately $355, or D