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From the perspective of the 30 year old male, what is the expected value of the amount...
From the perspective of the 30 year old male, what is the expected value of the amount that is received from the insurance company in the following case:
There is a .9986 probability that a randomly selected 30 year old male lives through the year. A life insurance company charges $161 for insuring that the male will live through the year. If the male does not survive the year the policy pays out $100,000.
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There is a 0.9986 probability that a randomly selected 30 year old male lives through the year. The policy pays $100000 and the premium charged is $161.
The amount that the person recieves if he dies is $100000 but the probability of this happening is 0.0014. The probability that he does not receive anything is 0.9986. A payment of $161 has to be made in both the cases.
The net expected value of the amount received from the insurance company is 0.0014*100000 - 161 = -$21
Posted by justaguide on May 25, 2012 at 3:44 AM (Answer #1)
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