There is a 0.0087 probability that a randomly selected 27-year-old male lives through the year. A life insurance company charges $150 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out s00,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 27-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is s. The value corresponding to not surviving the yea i (Type integers or decimals. Do not round.) b. If the 27-year-old male purchases the policy, what is his expected value? The expected value is sO (Round to the nearest cent as needed.) o. Can the insurance company expect to make a profit from many such policies? Why? because the insurance company expects to make an average profit of $ on every 27-year-old male it insures for 1 year. (Round to the nearest cent as needed.)
There is a 0.0087 probability that a randomly selected 27-year-old male lives through the year. A life insurance company charges $150 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out s00,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 27-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is s. The value corresponding to not surviving the yea i (Type integers or decimals. Do not round.) b. If the 27-year-old male purchases the policy, what is his expected value? The expected value is sO (Round to the nearest cent as needed.) o. Can the insurance company expect to make a profit from many such policies? Why? because the insurance company expects to make an average profit of $ on every 27-year-old male it insures for 1 year. (Round to the nearest cent as needed.)
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 23CE
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Transcribed Image Text:There is a 0.9987 probability that a randomly selected 27-year-old male lives through the year. A life insurance company
charges $159 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out
s90,000 as a death benefit. Complete parts (a) through (c) below.
a. From the perspective of the 27-year-old male, what are the monetary values corresponding to the two events of surviving
the year and not surviving?
The value corresponding to surviving the year is S
The value corresponding to not surviving the year is S
(Type integers or decimals. Do not round.)
b. If the 27-year-old male purchases the policy, what is his expected value?
The expected value is S-
(Round to the nearest cent as needed.)
c. Can the insurance company expect to make a profit from many such policies? Why?
because the insurance company expects to make an average profit of $
on every 27-year-old male it insures for
1 year.
(Round to the nearest cent as needed.)
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