Question

Suppose a life insurance company sells a $240,000 one-year term life insurance policy to a 19-year-old female for $240. The probability that the female survives the year is 0.999578. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ (Round two decimal places as needed.)

Answer 1

$138.72

Explanation:

(1-0.999578)*$240,000 = $101.28

$240 - $101.28 = $138.72