PROBABILITY HELP!!!

[jack_chay]

Another hard problem from the Essentials Textbook ~

A concert featuring a popular singer is scheduled to be held in a large open air theatre. The
promoter is concerned that rain will cause people to stay away. A weather forecaster
predicts that the probability of rain on any day at that particular time of the year is 0.33. If it
does not rain the promoter will make a profit of $250 000 on the concert. If it does rain the
profit will be reduced to $20 000. An insurance company agrees to insure the concert for
$250 000 against rain for a premium of $60 000. Should the promoter buy the insurance?

Thanks in advance

[RKTR]

Another hard problem from the Essentials Textbook ~

A concert featuring a popular singer is scheduled to be held in a large open air theatre. The
promoter is concerned that rain will cause people to stay away. A weather forecaster
predicts that the probability of rain on any day at that particular time of the year is 0.33. If it
does not rain the promoter will make a profit of $250 000 on the concert. If it does rain the
profit will be reduced to $20 000. An insurance company agrees to insure the concert for
$250 000 against rain for a premium of $60 000. Should the promoter buy the insurance?

Thanks in advance

if the promoter doesnt buy the insurance
0.33 x 20000 + 0.67 x 250000 = $174100

if the promoter buys the insurance
0.33 x (20000 + 250000 -60000) + 0.67 x (250000 - 60000)
=0.33 x 210000 + 0.67 x 190000
= $196600

therefore, the promoter should buy the insurance.

[TrueTears]

ofcourse we are assuming 0% interest rates here ^_^

[jack_chay]

THANKYOU ~

[jack_chay]

AND LOL... yeah... im pretty sure its zero interest  >.<