Expected Value Q: A 28-year-old man pays $208 for a one-year

[Angel626]

A 28-year-old man pays $208 for a one-year life insurance policy with coverage of $110,000. If the probability that he will live through the year is 0.9993, what is the expect value for the insurance policy?

Heres what I did:

($208)-(0.9993) - ($109792)(0.0007)
207.0007 - 76.8544 = 130.1463

 

[GeneralSynopsis]

Re: Expected Value Q: A 28-year-old man pays $208 for a one-

A 28-year-old man pays $208 for a one-year life insurance policy with coverage of $110,000. If the probability that he will live through the year is 0.9993, what is the expect value for the insurance policy?

Heres what I did:

($208)-(0.9993) - ($109792)(0.0007)
207.0007 - 76.8544 = 130.1463

The probability he dies is 0.0007 and the return is $(110000 - 208)

The probability he lives is 0.9993 and the return is -$208.

So the expected value is:

0.0007*(110000-208)+0.9993*(-208)=-131 dollars.

GS