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Assume 4 in every 1000 students at the local community college have to quit due to serious health issues. An insurance company offers them $11000 policy for $50 a year. What is the amount the insurance company should expect to make on every student that pays?

Respuesta :

prob student quits and receives $8000, thus costing the company $7950, 
is 0.003. 

prob student doesn't quit, thereby contributing $50 to company income, 
is 0.997 

Therefore expected receipt for company 
= $(0.003*(-7950) + 0.997*50) 
= $(49.85 - 23.85) 
= $26
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