Compute insurance company-s expected profit

Reference no: EM13109827

The insurance company will insure a $50000 diamond for its full value againtst theft at premium of $400 per year. Assume that probanility that dimond will be stolen is .005, and let x denote insurance company's profit.

a) set up probability distribution of random variable x.
b) Compute insurance company's expected profit.
c) Determine premium that insurance company must chare if it wants its expected profit to be $1000

Reference no: EM13109827

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