# Can the insurance company expect to make a profit and why?There is a .9986 probability that a randomly selected 30 year old male lives through the year, A life insurance company charges \$161 for...

Can the insurance company expect to make a profit and why?

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.

justaguide | Certified Educator

There is a 0.9986 probability that a randomly selected 30 year old male lives through the year. The life insurance company charges \$161 for insuring the person's life for one year. If the person does not survive the year the policy pays out \$100,000.

The amount paid out by the insurance company is 0*0.9986 + 100000*(1 - 0.9986) = \$140

The amount received by the company is \$161.

161 - 140 = \$21

This gives a net profit of \$21 that is made by the insurance company.