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 with insurance?
A)$100
B)$850
C)$100,000
D)$850,000

Question

Quizplus · Accepted Answer

The expected loss with insurance, considering the $100,000 deductible and the 1 in 1000 chance of an incident, is calculated as (1/1000) * $100,000 = $100.

Whitewater Rapids Provides Canoes to Tourists Eager to Ride Whitewater