# Statistics

posted by .

) Laura McCarthy, the owner of Riverside Bakery, has been approached by insurance underwriters trying to convince her to purchase flood insurance. According to local meteorologists, there is a 0.01 probability that the river will flood next year. Riverside’s profits for the coming year depend on whether Laura buys the flood insurance and whether the river floods. The profits (which take into consideration the \$10,000 premium for the flood insurance) for the four possible combinations of Laura’s choice and river conditions are:
The River
Does Not
Flood Floods
Insurance No Flood
Decision Insurance \$200,000 -\$1,000,000
Get Flood
Insurance \$190,000 \$200,000
a. If Laura decides not to purchase flood insurance, use the appropriate discrete probability distribution to determine Riverside’s expected profit next year.
b. If Laura purchase the flood insurance, what will be Riverside’s expected profit next year?
c. Given the results in parts (a) and (b), provide Laura with a recommendation.

• Statistics -

The four possibilities are:

However, since there are no estimates of the profits from the previous year, more data is needed to estimate the profits under those conditions.

I hope this helps. Thanks for asking.

## Similar Questions

1. ### Statistics

1) Laura McCarthy, the owner of Riverside Bakery, has been approached by insurance underwriters trying to convince her to purchase flood insurance. According to local meterologist, there is a 0.01 probability that the river will flood …
2. ### Bible Study

The fact that the Flood lasted over a year is?
3. ### Statistics

Assume that about 45% of all U.S. adults try to pad their insurance claims. Suppose that you are the director of an insurance adjustment office. Your office has just received 110 insurance claims to be processed in the next few days. …
4. ### Statistics

Assume that about 45% of all U.S. adults try to pad their insurance claims. Suppose that you are the director of an insurance adjustment office. Your office has just received 110 insurance claims to be processed in the next few days. …
5. ### Statistics

Assume that about 45% of all U.S. adults try to pad their insurance claims. Suppose that you are the director of an insurance adjustment office. Your office has just received 110 insurance claims to be processed in the next few days. …
6. ### Statistics

Assume that about 45% of all U.S. adults try to pad their insurance claims. Suppose that you are the director of an insurance adjustment office. Your office has just received 110 insurance claims to be processed in the next few days. …
7. ### Statistics

Assume that about 45% of all U.S. adults try to pad their insurance claims. Suppose that you are the director of an insurance adjustment office. Your office has just received 110 insurance claims to be processed in the next few days. …
8. ### statistics

Assume that about 45% of all U.S. adults try to pad their insurance claims. Suppose that you are the director of an insurance adjustment office. Your office has just received 110 insurance claims to be processed in the next few days. …
9. ### statistics

According to the book Are yoy Normal?, 40% of all US adults try to pad their auto insurance claims to cover their deductible. Your office had just received 128 in insurance claims to be processed in the next few days. What is the probability
10. ### statistics

According to the book Are you Normal?,40% of all US adults try to pad their auto insurance claims to cover their deductible. Your office has just received 128 in insurance claims to be processed in the next few days, what is the probability

More Similar Questions