Scatterbrain Samantha often forgets to lock her house.This has caused the probability of a burglary to be 30%.If her house gets broken into,she faces a property loss of $10,000,otherwise she gets to keep her $100,000.If Samantha is offered full coverage for her house at $1,500,what is her expected wealth with the insurance policy?
A)$80,000
B)$87,000
C)$97,000
D)$98,500

Question

​Scatterbrain Samantha often forgets to lock her house.This has caused the probability of a burglary to be 30%.If her house gets broken into,she faces a property loss of $10,000,otherwise she gets to keep her $100,000.If Samantha is offered full coverage for her house at $1,500,what is her expected wealth with the insurance policy?
A)​$80,000
B)$87,000
C)$97,000
D)​$98,500

Quizplus · Accepted Answer

With the insurance policy, Samantha pays $1,500 for full coverage. This means regardless of whether a burglary happens or not, she will not face the $10,000 loss. Therefore, her expected wealth with the insurance is her total wealth minus the insurance premium: $100,000 - $1,500 = $98,500.

​Scatterbrain Samantha Often Forgets to Lock Her House

Scatterbrain Samantha Often Forgets to Lock Her House