a. From the perspective of the 50-year-old female, what are the values corresponding to the two events if surviving the year and not surviving. b. Ifa 50-year-old female purchase the policy, what is her expected value? c. Can the insurance company expect to make a profit from many such policies? Why?

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Problem 8
There is a 0.9968 probability that a randomly selected 50-year-old female lives through
the year (based on data from the U.S. Department of Health and Human Services). A
Fidelity life insurance company charges $226 for insuring that the female will live
through the year. If she does not survive the year, the policy pays out $50,000 as a death
benefit.
a. From the perspective of the 50-year-old female, what are the values
corresponding to the two events if surviving the year and not surviving.
b. If a 50-year-old female purchase the policy, what is her expected value?
c. Can the insurance company expect to make a profit from many such policies?
Why?
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Transcribed Image Text:Problem 8 There is a 0.9968 probability that a randomly selected 50-year-old female lives through the year (based on data from the U.S. Department of Health and Human Services). A Fidelity life insurance company charges $226 for insuring that the female will live through the year. If she does not survive the year, the policy pays out $50,000 as a death benefit. a. From the perspective of the 50-year-old female, what are the values corresponding to the two events if surviving the year and not surviving. b. If a 50-year-old female purchase the policy, what is her expected value? c. Can the insurance company expect to make a profit from many such policies? Why? Scanned with CamScanner google.com/photo/AF1QipPXI5LIYWhHE3yTb1ApgwZqvjQ5qkwS622YgZP2 lo.google.com/photo/AF1QipOSGsjeo_XWojaZKqfnSk4SJil5faTq4aBVy9TG
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