Question

In: Statistics and Probability

A company sells life insurance policies for $550. If the policyholder dies in the next 10...

A company sells life insurance policies for $550. If the policyholder dies in the next 10 years, then the company will pay out $43,000 to the benefactor. Otherwise, the company pays out nothing. What is the expected profit per policy for the company, given that the probability of death for a policyholder in the next 10 years is 0.004? Report your answer rounded to the nearest dollar. NO CENTS.

Solutions

Expert Solution

Expected value of the profit per policy for the company

= $(550 - 43000) * 0.004 + $550 * (1 - 0.004)

= $ 378

orchestra answered 2 years ago
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