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Juliette [100K]
3 years ago
14

You purchase a $100,000 life insurance policy for a $300 premium each year. If the probability of living is 0.999, find the expe

cted value for the insurance company.
Mathematics
1 answer:
Lemur [1.5K]3 years ago
4 0

Answer:

The expected value for the insurance company is $200

Step-by-step explanation:

In order to calculate the expected value for the insurance company we would have to make the following calculation:

expected value for the insurance company=expected value live+expected value die

expected value live=Net gain*probability of living

expected value live=$300*0.999=$299.70

expected value die=Net gain*probability of die

expected value die=(-$100,000 + $300)*0.001

expected value die=$-99.70

Therefore, expected value for the insurance company=$299.70-$99.70

expected value for the insurance company=$200

The expected value for the insurance company is $200

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