There is a.9983 probability te year, the policy a From the penspective of the 30

Question

There is a.9983 probability te year, the policy a From the penspective of the 30-year-old male, what are the The value coresponding to surviving the year is S The value omesponding to not surviving the year is that a randomly selected 30-year-old male lives through the year. A life insurance company pays out $110,000 as a death beneft Completke parts (a) through (e) below (Type rtegos or decr Do not rund , b. H the 30-year -old male purchases the policy, what is his expected value? The espected value s Round to the nearest cent as needed) Can the insurance company expect to make a proft from many such policies? Why? Yos because the insurance company expects to make an aveinage prolt of on every 30 year-old malei inures for 1 year Round to the nearest cent as needed 8 9 0

Explanation / Answer

a) If he lives, he loses the cost of the policy. -$196.

If he dies, hs estate gains the death benefit minus the cost of the policy: 110,000 - 196 = $109804

b)

The expected value for the 30-year old is -$9.00

C) Yes, the insurence company can expect to make an average of $9.0 on every 30-year-old make it insurence for 1 year.

X P(x) X*P(x) -196 0.9983 -195.667 109804 0.0017 186.667 1.0000 -9.000

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