Mathematics, 31.12.2020 19:30, lowemadison047
There is a 0.9989 probability that a randomly selected 29-year-old male lives through the year. A life insurance company charges $197 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $100,000 as a death benefit.
Required:
a. From the perspective of the 29-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving?
b. If the 29-year-old male purchases the policy, what is his expected value?
c. Can the insurance company expect to make a profit from many such policies? Why?
Answers: 1
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