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 man’s expected value for the insurance policy?
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.
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