An insurance company is considering offering fire insurance

An insurance company is considering offering fire insurance to customers in a certain state. After examining thousands of records of insurance claims in the area, they have come up with the following information:

First convert the table into a probability distribution by dividing each number in the \"Claims\" column by the total number of claims. Take probability calculations to 3 decimal places.

Let X be the expected payout. Find E(X) to two decimal places.

Solution

Consider the table:

Thus,

E(x) = Sum (xP(x)) = 4639.984 = 4639.98 [ANSWER]