Suppose a life insurance company sells a $200,000 1-year term life insurance policy to a 20-year-old female for $300. According to the Nationa Vital Statistics Report, 58(21), the probability that the female survives the year is 0.999544. Compute and interpret the expected value of this policy to the insurance company. The expected value is S (Round to the nearest cent as needed.) Which of the following interpretations of the expected value is correct? Select the correct choice below and fill in the answer box to complete your choice. (Round to the nearest cent as needed.) O A. The insurance company expects to make a maximum profit of $ on every 20-year-old female it insures for 1 year. O B. The insurance company expects to make a profit of $ on every 20-year-old female it insures for 1 month. O C. The insurance company expects to make a minimum profit of S on every 20-year-old female it insures for 1 month. O D. The insurance company expects to make a profit of $ on every 20-year-old female it insures for 1 year.

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**Life Insurance Expected Value Calculation for a 20-Year-Old Female**

Suppose a life insurance company sells a $200,000 1-year term life insurance policy to a 20-year-old female for $300. According to the National Vital Statistics Report, 58(21), the probability that the female survives the year is 0.999544. Compute and interpret the expected value of this policy to the insurance company.

### The Expected Value Calculation

**The expected value is $____.**  
(Round to the nearest cent as needed.)

### Interpretation of the Expected Value

Which of the following interpretations of the expected value is correct? Select the correct choice below and fill in the answer box to complete your choice.  
(Round to the nearest cent as needed.)

- **Option A:** The insurance company expects to make a maximum profit of $____ on every 20-year-old female it insures for 1 year.
- **Option B:** The insurance company expects to make a profit of $____ on every 20-year-old female it insures for 1 month.
- **Option C:** The insurance company expects to make a minimum profit of $____ on every 20-year-old female it insures for 1 month.
- **Option D:** The insurance company expects to make a profit of $____ on every 20-year-old female it insures for 1 year.

**Note:** The detailed expected value calculation would typically involve understanding the survival and death probabilities and how they impact the insurance payout and profit margins for the company.
Transcribed Image Text:**Life Insurance Expected Value Calculation for a 20-Year-Old Female** Suppose a life insurance company sells a $200,000 1-year term life insurance policy to a 20-year-old female for $300. According to the National Vital Statistics Report, 58(21), the probability that the female survives the year is 0.999544. Compute and interpret the expected value of this policy to the insurance company. ### The Expected Value Calculation **The expected value is $____.** (Round to the nearest cent as needed.) ### Interpretation of the Expected Value Which of the following interpretations of the expected value is correct? Select the correct choice below and fill in the answer box to complete your choice. (Round to the nearest cent as needed.) - **Option A:** The insurance company expects to make a maximum profit of $____ on every 20-year-old female it insures for 1 year. - **Option B:** The insurance company expects to make a profit of $____ on every 20-year-old female it insures for 1 month. - **Option C:** The insurance company expects to make a minimum profit of $____ on every 20-year-old female it insures for 1 month. - **Option D:** The insurance company expects to make a profit of $____ on every 20-year-old female it insures for 1 year. **Note:** The detailed expected value calculation would typically involve understanding the survival and death probabilities and how they impact the insurance payout and profit margins for the company.
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