Question

13. There is a 0.9988 probability that a randomly selected 33​-year-old male lives through the year. A life insurance company charges ​$194 for insuring that the male will live through the year. If the male does not survive the​ year, the policy pays out​$120 comma 000 as a death benefit. Complete parts​ (a) through​(c) below.

a. From the perspective of the 33​-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 33​-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,No,) because the insurance company expects to make an average profit of ​$_____ on every 33- year dash old male it insures for 1 year.

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

Answer 1

a)e value corresponding to surviving the year is ​$ -194

value corresponding to not surviving the year is​$ =120000-194 =119806

b) expected value =-194*0.9988+119806*(1-0.9988)= $ -50

c) Yes, because the insurance company expects to make an average profit of ​$ 50 on every 33- year dash old male it insures for 1 year.