An insurance company is going to charge $388 for a 1-year $80000 policy for men

Question

An insurance company is going to charge $388 for a 1-year $80000 policy for men who don't smoke, and are 39 years old. The probability that this group will die in the next year is 0.0036.

"PLEASE SHOW YOUR WORK".

What is the probability of this group of men living? ____________(Write answer as a deciaml, NOT a % rounded to 4 deciaml places)

What is the expected value of the policy for the insurance company? $ _________pre policy.

How much money would 1300 policies like this generate for the insurance company? $_______________.

Explanation / Answer

P( this group of men living) = 1-P( they die ) = 1-,0036 = .9964

E(X) = It is .0036*80000 - 388 = -$100

This means a expected loss of $100 for this group of men

If 1300 policies were genrated then they would make money = 1300 *(100) = $130,000 money from the sale of 1300 such policies.

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