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There is a 0.9989 probability that a randomly selected 27yearold male lives through the year. A life insurance company charges $152 for insuring that the
There is a 0.9989 probability that a randomly selected 27yearold male lives through the year. A life insurance company charges $152 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $80,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective ofthe 2?-yearold 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 $ E (Type integers or decimals. Do not round.) b. If the 27-year-old male purchases the policy, what is his expected value? The expected value is $ E (Round to the nearest cent as needed.) 6. Can the insurance company expect to make a prot from many such policies? Why? Yes, because the insurance company expects to make an average profit of $Don every 27year-old male it insures for 1 year. (Round to the nearest cent as needed.)
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