Question

In: Statistics and Probability

Sam is applying for a single year life insurance policy worth $29,300.00.

Sam is applying for a single year life insurance policy worth $29,300.00. If the actuarial tables determine that she will survive the next year with probability 0.997, what is her expected value for the life insurance policy if the premium is $426.00?

Solutions

Expert Solution

Probaility of survival=0.997

Probabilty of non survival=1-0.997=0.03

If sam dies,her death benefit wll be 0.03*29300=87.9

If sam survives,he gets 0.

Expected value=Expected benefit-cost

=87.9-426=-338.1

orchestra answered 2 years ago
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