Question 1138277
the probability of someone dying from being in an airplane is 22 / 10 million.


if a person dies, that person's heirs will receive 100,000.


the cost of a policy is 1 dollar.


the expected value from each policy sold to the company that sells the insurance is 1 dollar minus 22 / 10 million * 100 thousand = .78.


in other words, if the company sold 10 million policies and the odds held, the company would take in 10 million dollars and have to shell out 22 * 100,000 = 2.2 million dollars.


it would have a gross profit of 10 million minus 2.2 million = 7.8 million.


divide that by 10 million policies sold, and the expected value to the company for each policy sold would be .78 dollars.