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Vinvika [58]
3 years ago
14

A man purchased a $23,000, 1-year term-life insurance policy for $425. Assuming that the probability that he will live for anoth

er year is 0.982, find the company's expected net gain.
Business
1 answer:
Katena32 [7]3 years ago
8 0

<u>Given:</u>

Insurance amount = $23000

Policy cost = $425

Probability of living = 0.982

<u>To find:</u>

The expected net gain of the company

<u>Solution:</u>

The expected net gain of the company can be calculated by the following steps,

\text{Expected pay-out = Insured amount } \times (1-\text{ Probability})\\\\\Rightarrow\$23000\times(1-0.982)\rightarrow\$23000\times0.018\rightarrow\$414

The company's expected gain would be \$425-\$414=\$11

Therefore, the company's expected gain is $11.

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