Life Insurance: Your company sells life insurance. You charge a 55 year old man $75 for a one year,

$100,000 policy. If he dies over the course of the next year you pay out $100,000. If he lives, you keep

the $75. Based on historical data (relative frequency approximation) the average 55 year old man has a

0.9994 probability of living another year.

(a) What is your expected profit on this policy? $_______

(b) What is an accurate interpretation of this value?

___It represents the profit on every policy sold.

___It represents the average profit per policy sold that you would expect if you sold a lot of

these policies.

____It represents the loss on every policy sold.

_____It is meaningless because the insurance company never makes this amount on a policy.