SOLUTION: A 28 year old can buy a one-year life insurance policy of $25,000 for $150. Past history indicates that the probability of a person dying at age 28 is 0.003. Determine the company'

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Question 537503: A 28 year old can buy a one-year life insurance policy of $25,000 for $150. Past history indicates that the probability of a person dying at age 28 is 0.003. Determine the company's expected gain per policy.
Answer by stanbon(75887) About Me  (Show Source):
You can put this solution on YOUR website!
A 28 year old can buy a one-year life insurance policy of $25,000 for $150. Past history indicates that the probability of a person dying at age 28 is 0.003. Determine the company's expected gain per policy.
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Let "x" be the company's gain:
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E(x) = 0.997*150 - 0.003(25000-150) = $75
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Cheers,
Stan H.
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