Asked by OLUSEGUN ADELEKE on Jun 29, 2024
Verified
(Scenario: Flood Area) Use Scenario: Flood Area.A flood may occur,causing you to lose your entire home.In this case,your expected loss resulting from the flood would be: Scenario: Flood Area
Suppose that you own a home that is estimated to be worth $250,000.You live in a flood plain;as a result,the probability that you will lose your home to a flood is 30%.
A) $250,000.
B) $75,000.
C) $15,000.
D) $100,000.
Expected Loss
An estimate of the amount of money or value that may be lost in an investment or venture, considering the probability of various outcomes.
Flood Plain
A flat area of land near a river or stream that is subject to flooding during periods of high discharge.
- Implement the expected value theory to compute costs associated with health and insurance premiums.
Verified Answer
ZK
Zybrea KnightJul 06, 2024
Final Answer :
B
Explanation :
The expected loss resulting from the flood can be calculated by multiplying the value of the asset with the probability of losing it. In this case, the expected loss would be $250,000 x 0.30 = $75,000. Therefore, the best choice is B) $75,000.
Learning Objectives
- Implement the expected value theory to compute costs associated with health and insurance premiums.