There is a 0.9987 probability that a randomly selected 32 year old male lives through the year. A life insurance company charges $183 for insuring that the male will live through the the year. If the male does not survive the year, the policy pays out $80,000 as a death benefit. a. From the perspective of the 32 year old male, what are the monetary values corresponding to the two events of surviving the year and not surviving ? b. If the 32 year old male purchases the policy, what is his expected value? c. Can the insurance company expect to make a profit from many such policies? Yes or no because the insurance company expects to make an average profit of $___ on every 32 year old male it insured for 1 year.
Compound Probability
Compound probability can be defined as the probability of the two events which are independent. It can be defined as the multiplication of the probability of two events that are not dependent.
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Probability theory is a branch of mathematics that deals with the subject of probability. Although there are many different concepts of probability, probability theory expresses the definition mathematically through a series of axioms. Usually, these axioms express probability in terms of a probability space, which assigns a measure with values ranging from 0 to 1 to a set of outcomes known as the sample space. An event is a subset of these outcomes that is described.
Conditional Probability
By definition, the term probability is expressed as a part of mathematics where the chance of an event that may either occur or not is evaluated and expressed in numerical terms. The range of the value within which probability can be expressed is between 0 and 1. The higher the chance of an event occurring, the closer is its value to be 1. If the probability of an event is 1, it means that the event will happen under all considered circumstances. Similarly, if the probability is exactly 0, then no matter the situation, the event will never occur.
There is a 0.9987
a. From the perspective of the 32 year old male, what are the monetary values corresponding to the two
b. If the 32 year old male purchases the policy, what is his
c. Can the insurance company expect to make a profit from many such policies?
Yes or no because the insurance company expects to make an average profit of $___ on every 32 year old male it insured for 1 year.
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