Whitewater Rapids provides canoes to tourists eager to ride Whitewater river's rapids.Management has determined that there is one chance in a thousand of a customer being injured or killed.Settlement of resulting lawsuits has an average cost of $850,000.Insurance with a $100,000 deductible is available.It covers the costs of lawsuits,unless there is evidence of criminal negligence.What is the expected loss without insurance?
A)$10
B)$850
C)$100,000
D)$850,000

Question

Quizplus · Accepted Answer

The expected loss without insurance is calculated by multiplying the probability of an incident (1/1000) by the average cost of a lawsuit ($850,000), which equals $850.

Whitewater Rapids Provides Canoes to Tourists Eager to Ride Whitewater