The probability that an 80-year-old male in the U.S. will die within one year is approximately 0.069941.?
The probability that an 80-year-old male in the U.S. will die within one year is approximately 0.069941. If an insurance company sells a one-year, $14,000 life insurance policy to such a person for $495, what is the company's expectation? (Round your answer to two decimal places.)
- llafferLv 76 months agoFavorite Answer
If the probability of death within the year is 0.069941, then the probability of the male being alive at the end of the year is 0.930059.
In the event there is no death, the company has no payout so only has the $495 revenue. Multiply the revenue by the probability to get that value:
495 * 0.930059 = 460.379205
In the event of the death, they have the $495 in revenue and the payout of $14,000. This results in a loss of $13,505. Multiply this by the probability to get that value:
-13505 * 0.069941 = -944.553205
Add the two numbers together to get the company's expected outcome:
460.379205 - 944.553205 = -484.174
Rounded to two DP we get an expected loss of $484.17.
- SumDudeLv 76 months ago
That the man will not die (considering you are working with only 1 individual).Source(s): accountant - dealing with specifics, not mass sales.
- Mike GLv 76 months ago
E(X) = 495-0.069941*14,000
- alexLv 76 months ago
495(1-0.069941)-14000(0.069941) = -519.79
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- RealProLv 76 months ago
495 - 14,000*0.069941 dollars
Two decimal places of what?