1 - A 28-year-old man pays $125 for a one-year life insurance policy with coverage of $140,000. If the probability that he will live through the year is 0.9994, to the nearest dollar, what is the manâ€™s expected value for the insurance policy?

2 -

Since the man has a 0.9994 probability of living, the expected value of his life insurance policy is only

(1 - 0.9994)(140,000) = $84

If you subtract the amount of money he already paid for the policy, $125, then he's actually lost money.

Secure Information

Content will be erased after question is completed.

Enter the email address associated with your account, and we will email you a link to reset your password.

Forgot your password?

Sign Up