Pure Petro, Ltd. is buying hurricane insurance for its off-coast oil drilling platform. During the next five years, the probabilityof total loss of only the above-water superstructure ($250 million) is 0.30, the probability of total loss of the facility ($950 million) is 0.30, and the probability of no loss is 0.40. Find the expected loss.
The solution provides step by step method for the calculation of expected loss from a probability distribution. Formula for the calculation is also included.