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insurance company offers auto insurance to customers in a certain area. Suppose they charge
$1,000 for a given plan. Based on historical data, there is a 2% probability that a customer with
this plan makes a claim, and in those cases, the average payout from the insurance company to
the customer was $18,000.
Here is a table that summarizes the possible outcomes from the company's perspective:
Event
Claim
No claim
Payout Net gain (X)
$18,000
-$17,000
$0
$1,000
Let X represent the company's net gain from one of these plans.
Calculate the expected net gain E(X).
E(X)=[
dollars