Mathematics, 10.10.2021 04:30 Savageboyn
30. Expected Value for Life Insurance There is a 0.9968 probability that a randomly
selected 50-year-old female lives through the year (based on data from the U. S. Department
of Health and Human Services). A Fidelity life insurance company charges $226 for insuring
that the female will live through the year. If she does not survive the year, the policy pays out
$50,000 as a death benefit.
a. From the perspective of the 50-year-old female, what are the values corresponding to the two
events of surviving the year and not surviving.
b. If a 50-year-old female purchases the policy, what is her expected value?
c. Can the insurance company expect to make a profit from many such policies? Why?
Answers: 1
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30. Expected Value for Life Insurance There is a 0.9968 probability that a randomly
selected 50-ye...
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