Given:
Insurance amount = $23000
Policy cost = $425
Probability of living = 0.982
To find:
The expected net gain of the company
Solution:
The expected net gain of the company can be calculated by the following steps,
[tex]\text{Expected pay-out = Insured amount } \times (1-\text{ Probability})\\\\\Rightarrow\$23000\times(1-0.982)\rightarrow\$23000\times0.018\rightarrow\$414[/tex]
The company's expected gain would be [tex]\$425-\$414=\$11[/tex]
Therefore, the company's expected gain is $11.
