Simpson Stewart
10/06/2024 · Elementary School

An insurance company will insure a \( \$ 280,000 \) home for its total value for an annual premium of \( \$ 580 \). If the company spends \( \$ 30 \) per year to service such a policy, the probability of total loss for such a home in a given year is 0.001 and you assume either total loss or no loss will occur, what is the company's expected annual gain (or profit) on each such policy?

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The company's expected annual gain on each policy is $270.

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