Answer:Expected value = - 94661.45
Explanation:
The Policy pay out is $95000 ,if a client is in life threatening accident insurance company will loose $95000, if the client is not in a life threatening accident the insurance company will gain $250
Probability (Client is in a threatening accident) = 0.999063
Probability (not in a life threatening accident)= 1 - 0.999063 = 0000937
Insurance Premium = $250
Insurance Payout = $95000
expected value = 0.999063 x (- (95000 - 250)) + 0.000937 x (250)
expected value = 0.999063 x (-94750) + 0.000937 x (250)
expected value = - 94661.21925 + 0.23425 = - 94661.44675
expected value = - 94661.45
Answer:
$160.75
Explanation:
the expected value of the policy will = (premium x probability of surviving) - (policy benefits x probability of dying)
the probability of surviving = 0.999063
the probability of dying = 0.000937
policy's expected value = ($250 x 0.999063) - ($95,000 x 0.000937) = $249.77 - $89.02 = $160.75
