SOLUTION: A 40-year-old man in the U.S. has a 0.247% risk of dying during the next year . An insurance company charges $260 per year for a life-insurance policy that pays a $100,000 death be

Question 1179477: A 40-year-old man in the U.S. has a 0.247% risk of dying during the next year . An insurance company charges $260 per year for a life-insurance policy that pays a $100,000 death benefit. What is the expected value for the person buying the insurance? Round your answer to the nearest dollar.

Answer by ikleyn(52788) (Show Source): You can put this solution on YOUR website!
.


The expected value for the person buying the insurance is


    0.00247*100000 - 260 = -13 dollars.


In other words, the person pays 13 dollars to have this opportunity for his (or her) family to get $100,000 
in case of his (or her) death.


It is also the amount for the insurance company to get (to gain) for their service, as a statistical average per person.

Solved, answered, explained and completed.

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