Suppose a life insurance company sells a $270 comma 000 one-year term life insurance policy to a 19-year-old female for $270. the probability that the female survives the year is 0.999519. compute and interpret the expected value of this policy to the insurance company.

the expected value of policy to insurance company is $144.44

Step-by-step explanation:

given data

sells = $270,000

life insurance policy = $270

probability = 0.999519

to find out

Compute and interpret the expected value of this policy to the insurance company

solution

we know here that probability that female wont survives year is = 1 - 0.999535

probability that female wont survives year = 0.000465

and

if female die company will lose 270000 - 270  = $269730

so

compute the expected value of policy to insurance company is =

= 270 × 0.999519 - $269730 × 0.000465

= 144.44

so the expected value of policy to insurance company is $144.44

b

step-by-step explanation: