Suppose a life insurance company sells a exist260,000 one-year term life insuran

Question

Suppose a life insurance company sells a exist260,000 one-year term life insurance policy to a 22-year-old female for exist180. The probability that the female survives the year is 0.999599. Compute and interpret the expected value of this policy to the insurance company. The expected value is exist ______. (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 exist16.36 on every 22-year-old female it insures for 1 month. The insurance company expects to make an average profit of exist6.89 on every 22-year-old female it insures for 1 month. The insurance company expects to make an average profit of exist75.74 on every 22-year-old female it insures for 1 month. The insurance company expects to make an average profit of exist179.93 on every 22-year-old female it insures for 1 year.

Explanation / Answer

Expected vlaue=probability*monthly policy amount

=0.999599*180

=179.93

ANSWER D

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