Answered: Jenny owns a home in a heavily wooded…

Calculus For The Life Sciences

2nd Edition

ISBN:9780321964038

Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Chapter12: Probability

Section12.3: Conditional Probability; Independent Events; Bayes' Theorem

Problem 27E: Another friend asks you to explain how to tell whether two events are dependent or independent. How...

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Related questions

Question

Jenny owns a home in a heavily wooded area. If there is a 1-in-25 chance of fire in the area, what is her expected loss given the following possible outcomes:

• Minor smoke damage: cost = $6000, probability = 50%
• Exterior fire damage: cost = $16000, probability = 30%
• Everything ruined: cost = $155000, probability = 5%

Answer Choices:

$622

$7080

$312

$880

Expert Solution

Step 1

Given that, Jenny owns a home in a heavily wooded area. If there is a 1-in-25 chance of fire in the area, we need to find her expected loss given the following possible outcomes:

• Minor smoke damage: cost = $6000, probability = 50%
• Exterior fire damage: cost = $16000, probability = 30%
• Everything ruined: cost = $155000, probability = 5%