Question

There is a 0.9983 probability that a randomly selected 32​-year-old male lives through the year. A life insurance company charges

​$198 for insuring that the male will live through the year. If the male does not survive the​ year, the policy pays out

​$100,000 as a death benefit. Complete parts​ (a) through​ (c) below.

a. From the perspective of the 32​-year-old ​male, what are the monetary values corresponding to the two events of surviving the year and not​ surviving?

The value corresponding to surviving the year is

The value corresponding to not surviving the year is

​(Type integers or decimals. Do not​ round.)

b. If the 32​-year-old male purchases the​ policy, what is his expected​ value?

​(Round to the nearest cent as​ needed.)

c. Can the insurance company expect to make a profit from many such​ policies? Why?

Answer 1