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A 28 year-old man pays $243 for a one-year life insurance policy with coverage of $100,000. If the probability that he will live through the year is 0.9993, what is the 28 year-old man's expected value for the insurance policy?

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sqdancefan

Answer:

  -$173

Step-by-step explanation:

The expected value is the sum of products of payments and their respective probabilities.

  He pays $243 with probability 1: (-$243)(1) = -$243

  He receives $100,000 with probability 1 -0.9993: ($100,000)(0.0007) = $70

The expected value for the man is ...

  -$243 +70 = -$173  . . . .  a cost of $173

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