The probability that a 25-year-old female in the U.S. will die within one year is about...
The probability that a 25-year-old female in the U.S. will die within one year is about 0.000514. An insurance company is preparing to sell a 25-year-old female a one-year, $40,000 life insurance policy. How much should it charge for its premium in order to have a positive expectation for the policy? (Round your answer to the nearest dollar.)
Homework Answers
Expected payoff for the insurance = P(death) x Insurance amount
= 0.000514 x 40,000
= 20.56
The company should charge at least $21 to have a positive expectation for the policy.
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