Suppose a life insurance company sells a $230,000 one-year term life insurance policy to a 24-year-old female for $200. The probability that the female survives the year is 0.999569. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ (Round to two decimal places as needed

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colethompson886 colethompson886

23-10-2021
Mathematics

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Suppose a life insurance company sells a $230,000 one-year term life insurance policy to a 24-year-old female for $200. The probability that the female survives the year is 0.999569. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ (Round to two decimal places as needed

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Аноним Аноним · Answer 1 · 2021-10-23T17:19:27+02:00

Suppose a life insurance company sells a $150,000 one-year term life insurance policy to a 23-year-old female for $260 the expected value of this policy to the insurance company will be:$198.35

Expected value=(260×0.999589)-(150,000-$260)×(1-0.999589)

Expected value=259.89314-149,740×0.000411

Expected value=$198.35

Interpretation of the Expected value:

Based on the above calculation the insurance company is expect to make an average profit of $198.35 on every 23-year-old female it insured for 1 year.

Inconclusion Suppose a life insurance company sells a $150,000 one-year term life insurance policy to a 23-year-old female for $260 the expected value of this policy to the insurance company will be:$198.35