Question

Asked Sep 27, 2019

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Suppose a person is looking for a one-year life insurance policy. They decide on a $232994 policy. This policy costs $291 per year. Suppose the probability the person dies in the year is 0.0006. Find the expected value of the policy for the insurance company. Give your answer as a decimal to at least two decimal places.

Step 1

Probability of dying =0.0006

Probability of not dying = 1-0.0006 =0.9994

Net profit to company if person dies = -$232994 +$291

Net profit to company if person does not die = $291

Step 2

Expected value can be calcul...

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