The annual premium for a $ 15 comma 000 15,000 insurance policy against the theft of a painting is $ 300 300. If the (empirical) probability that the painting will be stolen during the year is 0. 03.03 , what is your expected return from the insurance company if you take out this insurance?

P (x) = 0.97

E (x) = $150

Explanation:

The expected return from the insurance company if the I nsurance is taken out will be:

A. Let assume x is the random variable for the amount received from the Insurance company.

Therefore:

x = $300-$0

=$300-$15,000

P (x) = 1-0.03=0.97

P (x) = 0.03

B.

E (x) = 0.97*$300-$14,700*0.03

=$291-$441

=$150