For the Legion of Doom, there are three possible financial states at the
end of the year:
(i) State 0 means cash of 1500. If in State 0, aggregate member charges
for the next year are set equal to operating expenses.
(ii) State 1 means cash of 500. If in State 1, aggregate member charges for
the next year are set equal to operating expenses plus 1000.
(iii) State 2 means cash less than 0. If in State 2, the Legion of Doom is
bankrupt and remains in State 2.
(iv) The Legion of Doom is subject to four risks each year. These risks are
independent. Each of the four risks occurs at most once per year, but may
occur again in a subsequent year.
(v) Three of the four risks each have a cost of 1000 and a probability
of occurrence of 0.20 per year. The fourth risk has a cost of 2000 and a
probability of occurrence of 0.10 per year.
(vi) Aggregate member charges are received at the beginning of the year.
(vii) i = 0
Calculate the probability that the Legion of Doom is not bankrupt at the
end of three years, given that it is in State 0 at time 0.
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