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Suppose a life insurance company sells a $260,000 1-year term life insurance policy to a 20-year-old female for $350. 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.

Suppose a life insurance company sells a $260,000 1-year term life insurance policy to a 20-year-old female for $350. 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.

College Algebra
College Algebra
10th Edition
ISBN:9781337282291
Author:Ron Larson
Publisher:Ron Larson
Chapter8: Sequences, Series,and Probability
Section8.7: Probability
Problem 11ECP: A manufacturer has determined that a machine averages one faulty unit for every 500 it produces....
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The expected value is $ (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.) A. The insurance company expects to make a profit of $ on every 20-year-old female it insures for 1 year. B. The insurance company expects to make a maximum profit of $ on every 20-year-old female it insures for 1 year. O C. The insurance company expects to make a minimum profit of $ on every 20-year-old female it insures for 1 month. D. The insurance company expects to make a profit of $ on every 20-year-old female it insures for 1 month.
Transcribed Image Text:The expected value is $ (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.) A. The insurance company expects to make a profit of $ on every 20-year-old female it insures for 1 year. B. The insurance company expects to make a maximum profit of $ on every 20-year-old female it insures for 1 year. O C. The insurance company expects to make a minimum profit of $ on every 20-year-old female it insures for 1 month. D. The insurance company expects to make a profit of $ on every 20-year-old female it insures for 1 month.
Suppose a life insurance company sells a $260,000 1-year term life insurance policy to a 20-year-old female for $350. 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.
Transcribed Image Text:Suppose a life insurance company sells a $260,000 1-year term life insurance policy to a 20-year-old female for $350. 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.
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