A 28-year-old man pays $254 for a one-year life insurance policy with coverage of $11,684. If...

A 28-year-old man pays $254 for a one-year life insurance policy with coverage of $11,684. If the probability that he will live through the year is 0.995, what is the expected value for the insurance policy?

Expert Solution

solution :

Expected value of the insurance policy

= $(11684- 254)*(1 - 0.995) - $254*0.995

= $ -195.58

So the man is expected to have a loss of $195.58 over the year.

orchestra answered 2 years ago

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