Originally Posted by
lexietx We are discussing random variables in class, but have only discussed theoretical application, and I am lost as to how to figure out word problems. Here is one from my homework:
An insurance company writes a policy to the effect that an amount of money A must be paid if some event E occurs within a year. If the company estimates that E will occur within a year with probability p, what should it charge the customer in order that its expected profit will be 10 percent of A?