An insurance company sells a $17,500, three-year term life insurance policy to an individual for $675....

An insurance company sells a $17,500, three-year term life insurance policy to an individual for $675. Find the expected return for the company if the probability the individual will live for the next three years is 0.99. (Round your answer to the nearest cent.)

Expert Solution

P(Die in three years) = 1 - 0.99 = 0.01

Hence,

Expected return for the company

= $675 * 0.99 - $(17500 - 675) * 0.01

= $ 500

orchestra answered 2 years ago

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