Expected profit from selling insurance policy


Consider an insurance company that sells hurricane insurance. In the policy the company agrees to pay the amount A if a hurricane damages the policyholder's home. The company determines that the probability that a hurricane damages the policyholder's home is p. How much should the company charge the policyholder if they want the expected profit from selling the insurance policy to be 5% of A?

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Basic Statistics: Expected profit from selling insurance policy
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