SOLUTION: Suppose a life insurance company sells a ​$300 comma 000 ​one-year term life insurance policy to a 24​-year-old female for ​$220. The probability that the female survives t

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Question 1155841: Suppose a life insurance company sells a ​$300 comma 000 ​one-year term life insurance policy to a 24​-year-old female for ​$220. The probability that the female survives the year is 0.999488. Compute and interpret the expected value of this policy to the insurance company.
Answer by ikleyn(52787) About Me  (Show Source):
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Expected value = 220 - (1-0.999488)*300,000 = 66.4 dollars.    ANSWER


$220 is the amount the company get from selling one insurance policy.


(1-0.999488)*300,000 is the amount they pay, in average.