Find the Expected Value

question 96

Multiple Choice

Find the expected value.
-An insurance company will insure a $220,000 home for its total value for an annual premium of $590. If the company spends $30 per year to service such a policy, the probability of total loss for
Such a home in a given year is 0.001 and you assume either total loss or no loss will occur, what is
The company's expected annual gain (or profit) on each such policy?

• A)-$220
• B)$290
• C)$340
• D)$370

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Definitions:

Earnings Process

The series of steps undertaken by a company to report income from its operations, culminating in the publication of financial statements.

Net Asset Value

Net Asset Value (NAV) is the total value of a fund's assets minus its liabilities, often used to price shares of mutual funds and ETFs.

Net Asset Valuation

A method of valuing a company or an investment fund, calculated by subtracting total liabilities from total assets.

Net Income Determination

The process of calculating a company's total earnings after subtracting all expenses, including taxes and costs, from total revenues.