1)

Suppose a life insurance company sells a $270,000 one-year term life insurance policy to a 22-year-old female for $280. The probability that the female survives the year is 0.999516. Compute and interpret the expected value of this policy to the insurance company.

The expected value is _____$

Which of the following interpretation of the expected value iscorrect?

A.

The insurance company expects to make an average profit of $279.86 on every 22-year-old female it insures for 1 year.

B.

The insurance company expects to make an average profit of $25.44 on every 22-year-old female it insures for 1 month.

C.

The insurance company expects to make an average profit of $13.57 on every 22-year-old female it insures for 1 month.

D.

The insurance company expects to make an average profit of $149.32 on every 22-year-old female it insures for 1 year.