Question

here is a probability that a randomly selected 30​-year-old male lives through the year. A life insurance company charges ​$154 for insuring that the male will live through the year. If the male does not survive the​ year, the policy pays out ​$ as a death benefit. Complete parts​ (a) through​ (c) below. Question content area bottom Part 1 a. From the perspective of the ​-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 ​$ negative 195. The value corresponding to not surviving the year is ​$ 99,805. ​(Type integers or decimals. Do not​ round.) Part 2 b. If the ​-year-old male purchases the​ policy, what is his expected​ value? The expected value is ​$ enter your response here.

Answer 1

Answer: a. From the perspective of the 30-year-old male, the monetary value corresponding to surviving the year is -$154 (the cost of the insurance policy). The monetary value corresponding to not surviving the year is $99,805 (the death benefit payout).

b. If the 30-year-old male purchases the policy, his expected value can be calculated using the formula:

Expected Value = (Probability of Event A) * (Value of Event A) + (Probability of Event B) * (Value of Event B)

In this case, the probability of surviving the year and not surviving the year can be assumed to be the same, as we don't have any specific information on the individual's health or life expectancy. Therefore, the probabilities can be assumed to be 0.5 each.

Plugging in the values, we get:

Expected Value = (0.5) * (-$154) + (0.5) * ($99,805) = ($50,326)

So, the expected value for the 30-year-old male purchasing the policy is $50,326.

Explanation: