An insurance policy costs $100 and will pay policyholder $10,000 if they suffer a major injury or $3,000 if they suffer a minor injury. The company estimates that each year 1 in every 2,000 policyholders may have a major injury, and 1 in 500 may have a minor injury
a. Create a model for x = profit of the company on one policy
b. What is the company expected profit on one policy? What is its standard deviation?

Question

An insurance policy costs $100 and will pay policyholder $10,000 if they suffer a major injury or $3,000 if they suffer a minor injury. The company estimates that each year 1 in every 2,000 policyholders may have a major injury, and 1 in 500 may have a minor injury
a. Create a model for x = profit of the company on one policy
b. What is the company expected profit on one policy? What is its standard deviation?