Question

There is a 0.9985 probability that a randomly selected 28​-year-old male lives through the year. A life insurance company charges ​$188 for insuring that the male will live through the year. If the male does not survive the​ year, the policy pays out ​$100 comma 000 as a death benefit. Complete parts​ (a) through​ (c) below.

a. From the perspective of the 28​-year-old ​male, what are the monetary values corresponding to the two events of surviving the year and not​ surviving?

The value corresponding to surviving the year is ​$___

The value corresponding to not surviving the year is ​$___

​(Type integers or decimals. Do not​ round.)

b. If the 28​-year-old male purchases the​ policy, what is his expected​ value?

The expected value is ​$___

​(Round to the nearest cent as​ needed.)

c. Can the insurance company expect to make a profit from many such​ policies? Why?

Yes? Or No? because the insurance company expects to make an average profit of ​$___

nothing on every 28 dash year dash old male it insures for 1 year.

​(Round to the nearest cent as​ needed.)

Answer 1

a)

value corresponding to surviving=		-188
value corresponding to not surviving=		99812

b)

expected value =-188*0.9985+99812*0.0015=

-38.00

c)

Yes, because the insurance company expects to make an average profit of $38 on every 28 dash year dash old male it insures for 1 year