SOLUTION: A 40-year-old man in the U.S. has a 0.245% risk of dying during the next year. An insurance company charges $250 per year for a life-insurance policy that pays a $100,000 death ben
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Question 1170763: A 40-year-old man in the U.S. has a 0.245% risk of dying during the next year. An insurance company charges $250 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 cent. Be careful with negative signs.
Expected Value: $ for the year Answer by Boreal(15235) (Show Source):
You can put this solution on YOUR website! amount lost is 250*0.99755 probability of not dying=-$249.39
amount gained is 100,000*0.00245=+$245
the expected value is the difference or -$4.39, It should be minus for the insurance company to do it.
