A 28-year-old man pays $223 for a one-year life insurance policy with coverage of $60,000. If...

Question

Question

A 28-year-old man pays $223 for a one-year life insurance policy with coverage of $60,000.

If the probability that he will live through the year is 0.9993, what is the expected value for the insurance policy?

Answer 1

Answer #1

Expected value of the insurance policy

= $(60000 - 223)*(1 - 0.9993) - $223*0.9993

= $ -181

So the man is expected to have a loss of $181 over the year.

Answer 2

Similar Homework Help Questions

A 28-year-old man pays $100 for a one-year life insurance policy with coverage of $200,000. If...

A 28-year-old man pays $100 for a one-year life insurance policy with coverage of $200,000. If the probability that he will live through the year is 0.9997, what is the expected value for the insurance policy?
28- year- old man pays $158 for one year life insurance policy with coverage of $110,000....

28- year- old man pays $158 for one year life insurance policy with coverage of $110,000. If the probability he will live through the year is policy? 0.9994, what is the expected value for the insurance
Life Insurance: Your company sells life insurance. You charge a 55 year old man $70 for...

Life Insurance: Your company sells life insurance. You charge a 55 year old man $70 for a one year, $100,000 policy. If he dies over the course of the next year you pay out $100,000. If he lives, you keep the $70. Based on historical data (relative frequency approximation) the average 55 year old man has a 0.9998 probability of living another year. (a) What is your expected profit on this policy? $ (b) What is an accurate interpretation of...

Suppose a life insurance company sells a $180,000 one-year term life insurance policy to a 20-year-old...

Suppose a life insurance company sells a $180,000 one-year term life insurance policy to a 20-year-old female for $220. The probability that the female survives the year is 0.999594. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ .
Suppose a life insurance company sells a $230,000 one-year term life insurance policy to a 19-year-old...

Suppose a life insurance company sells a $230,000 one-year term life insurance policy to a 19-year-old female for $220. The probability that the female survives the year is 0.999516. Compute and interpret the expected value of this policy to the insurance company. The expected value is Round to two decimal places as needed.)
A man wishes to purchase a life insurance policy that will pay the beneficiary $15,000 in...

A man wishes to purchase a life insurance policy that will pay the beneficiary $15,000 in the event that the man's death occurs during the next year. Using life insurance tables, he determines that the probability that he will live another year is 0.97. What is the minimum amount that he can expect to pay for his premium? Hint: The minimum premium occurs when the insurance company's expected profit is zero.

Suppose a life insurance company sells a $280,000 one-year term life insurance policy to a 22-year-old...

Suppose a life insurance company sells a $280,000 one-year term life insurance policy to a 22-year-old female for $290. The probability that the female survives the year is 0.999583. Compute and interpret the expected value of this policy to the insurance company.
There is a 0.9958 probability that a randomly selected 28-year-old male lives through the year. A...

There is a 0.9958 probability that a randomly selected 28-year-old male lives through the year. A life insurance company charges $172 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $120,000 as a death benefit Complete parts (a) through (c) below. a. From the perspective of the 28-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The...
Suppose a life insurance company sells a $240,000 one-year term life insurance policy to a 20-year-old female for $330....

Suppose a life insurance company sells a $240,000 one-year term life insurance policy to a 20-year-old female for $330. The probability that the female survives the year is 0.999458. Compute and interpret the expected value of this policy to the insurance company. The expected value is $|| 1. (Round to two decimal places as needed.)

Suppose a life insurance company sells a $150,000 one-year term life insurance policy to a 21-year-old...

Suppose a life insurance company sells a $150,000 one-year term life insurance policy to a 21-year-old female for $340. The probability that the female survives the year is 0.999561. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ . (Round to two decimal places as needed.) Which of the following interpretation of the expected value is correct? O A. The insurance company expects to make an average profit of $339.85 on...