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Theory of Expectation :: Problems on Stocks And Insurance : Probability Distribution

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No. Problems & Solutions [Click Hide/Show to display the solutions below the question]
01. It the probability that the value of a certain stock will remain the same is 0.46, the probabilities that its value will increase by Rs.0.50 or Rs.1.00 per share are respectively 0.17 and 0.23 and the probability that its value will decrease by Rs.0.25 per share is 0.14, what is the expected gain per share?

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02. Suppose an insurance company offers a 45 year old man a Rs.1,000 one year term insurance policy for an annual premium of Rs.12. Assume that the number of deaths per one thousand is five for persons in this age group. What is the expected gain for the insurance company on a policy of this type?

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03. From a life table, it is observed that the probability is 0.98 that a 35 years old man will live for one more year. An insurance company offers to sell such a man a Rs.10,000 are your term life insurance policy at a premium of Rs.220. what is the company’s expected gain?

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No. Problems for Practice
01. If it rains, an umbrella sales man can earn Rs. 300 per day. If it is fair he can lose Rs. 60 per day. What is his expectation if the probability of rain is 0.3?

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