Suppose a life insurance company sells a $290,000 a year term life insurance policy to a...

Suppose a life insurance company sells a $290,000 a year term life insurance policy to a 20-year-old female for $200. The probability that the female survives the year is 0.999634. compare and interpret the expected value of this policy to the insurance company. the expected value is $___ (round to two decimal places as needed)

Expert Solution

Expected value of policy to the insurance company

= premium*p(survival) - insurance*p(death)

= $200(0.999634) - $290,000(1-0.999634)

= $93.7868

Rounding off to two decimal places, we get $93.79

orchestra answered 2 years ago

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