SOLUTION: the probability that an american dies citizen in his 20th year is 0.00178 assume that a life insurence company will sell a 1000$ one year policy to a 19 year old for 5$ what is exp

Algebra ->  Probability-and-statistics -> SOLUTION: the probability that an american dies citizen in his 20th year is 0.00178 assume that a life insurence company will sell a 1000$ one year policy to a 19 year old for 5$ what is exp      Log On


   

Question 384392: the probability that an american dies citizen in his 20th year is 0.00178 assume that a life insurence company will sell a 1000$ one year policy to a 19 year old for 5$ what is expected gain obtained by insurence company from selling one such polecy
Answer by stanbon(75887) About Me  (Show Source):
You can put this solution on YOUR website!
the probability that an american dies citizen in his 20th year is 0.00178. assume that a life insurance company will sell a $1000 one year policy to
a 19 year old for $5.
what is expected gain obtained by insurance company from selling one such
a policy?
----
Let the "gain" for the company be "x":
---
x values are $5 and -$995
probabilities are (1-0.00178) and 0.00178
------------------
E(x) = 0.99822*5 + 0.00178*(-995) = $3.22
===============
Cheers,
Stan H.