Suppose a particular life insurance policy has an expected profit for the insurer of $32. Which...

Suppose a particular life insurance policy has an expected profit for the insurer of $32. Which of the following is the best interpretation of this value.

a) The company will earn an average of $32 for each additional policy sold.

b) The company can expect a profit of $32 for each policy.

c) When the company sells a policy, it is guaranteed a $32 profit.

d) The company will earn $32 for each policy sold.

Expert Solution

The best interpretation of expected value is:

The company can expect a profit of $32 for each policy.

Option B is correct.

orchestra answered 2 years ago

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