1. The problem statement, all variables and given/known data

3. The attempt at a solution

The textbook says the answer is 0. I think they get that by saying that 5% of 240 is 12. So the plane is overbooked by 12. So there are 252 people booked on the plane. Then the binomial expectation is (252*0.95)=239.4. Which means they payout nothing since less than 240 people are expected to show up.

However, I don't really think that's logical...the way I would do it is:

expectation=(200)(probability that 1 is bumped off)+(400)(probability that 2 are bumped off)+...etc, up to 12. Because how could they only be expected to pay out 0 as the textbook says, when sometimes they WILL have to pay out something (there is always a chance someone will get bumped off), which makes it >0.

Just to add, for example, if they were paying a trillion dollars for every person bumped off, the expected value wouldn't be 0 intuitively...just because they have a low chance of paying that, doesn't mean it can't happen.

Yea it will take a lot longer, but the answer won't be 0 for sure though. Like I said, how could the expected payout be zero when there IS a chance they will pay SOMETHING out. That's what I've done for every other question, for http://en.wikipedia.org/wiki/Expected_value#Examples"