Suppose a life Insurance company sells a $180 000 one-year term life insurance p

Question

Suppose a life Insurance company sells a $180 000 one-year term life insurance policy to a 20-year-old female for $200 The probability that the female survives the year is 0 9996446 Compute and interpret the expected value of this policy to the insurance company The expected value is $ (Round to two decimal places as needed Which of the following interpretation of the expected value is correct The insurance company expects to make an average profit of $12.39 on every 20-year-old female it insures for 1 month. The insurance company expects to make an average profit of $199.93 on every 20-year-old female it insures for 1 year. The insurance company expects to make an average profit of $136.28 on every 20-year-old female it insures for 1 year The insurance company expects to make an average profit of $18.18 on every 20-year-old female it insures for 1 month.

Explanation / Answer

150000-200 = 149800

1-0.999646 =0.000354

exp-value = 200(.999646) - 149,800(0.000354) = = $136.28

so option c is correct

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