Question

A 40-year-old man in the U.S. has a 0.248% risk of dying during the next year . An insurance company charges $280.00 per year for a life-insurance policy that pays a $100,000.00 death benefit.

What is the expected value for the person buying the insurance?
The expected value for the person buying the insruance is ______ for the year.

Answer 1

The expected value for the person buying the insurance is $69.92 for the year. This is calculated by multiplying the risk of death (0.00248) by the death benefit ($100,000) and subtracting the cost of the insurance ($280).

Expected Value = (0.00248 x $100,000) - $280

Expected Value = $69.92