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There is a 0.9986 probability that a randomly selected 33-year-old male lives through the year. A life insurance company charges $180 for insuring that the
There is a 0.9986 probability that a randomly selected 33-year-old male lives through the year. A life insurance company charges $180 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $120,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 33-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 $ 180 The value corresponding to not surviving the year is $ 119,820 (Type integers or decimals. Do not round.) b. If the 33-year-old male purchases the policy, what is his expected value? The expected value is $. (Round to the nearest cent as needed.) c. Can the insurance company expect to make a profit from many such policies? Why? Yes, because the insurance company expects to make an average profit of $ on every 33-year-old male it insures for 1 year. (Round to the nearest cent as needed.)
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