An insurance company offers MS adults between the ages of 25 and 34 a $100,000 life insurance policy for $18 a month. They use the fact that MS has a yearly death rate of 172.8 per 100,000 residents aged 25-34. If the insurance company has 10,000 customers with these life insurance policies in Mississippi, what is its profit at the end of the year?

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onkwonkwoAnswered22 minutes ago

its profit at the end of the year

=$428270

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Explanation:

p (death) = .001728

E(X) for 1 year = ?

Since it is for 1 year, we will have 12 installments of $18.

= p1*x1 +p2*x2

= .001728*100000 - (1-.001728)*18*12

= -$42.827

expected value is a profit of of $42.827 per customers for the insurance company at the end of 1 year of the stated policy

and they were 10,000 customers,

expected profit

=$42.827*10000

$428270

Why did you use (1- .001728) - explain the use of 1 -