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Daniel-James
Insurance Company will insure an offshore Mobil Oil production platform
against weather losses for one year. The president of Daniel-James estimates
the following losses for that platform (in millions of dollars) with the
accompanying probabilities:
|
Amount
of Loss
($ millions)
|
Probability
of Loss
|
|
0
|
.98
|
|
40
|
.016
|
|
300
|
.004
|
What is the
expected amount Daniel-James will have to pay to Mobil in claims? (Enter your answer in millions to 2 decimal places. Omit
the “$” sign in your response.)
|
(b)
|
What is the
likelihood that Daniel-James will actually lose less than the expected
amount? (Round your answer to 2 decimal
places.)
|
|
(c)
|
Given that
Daniel-James suffers a loss, what is the likelihood that it is for $300
million? (Round your answer to 2 decimal
places.)
|
|
(d)
|
Daniel-James
has set the annual premium at $2.0 million. Does that seem like a fair
premium? Will it cover its risk? |
|
