Answer:
The value is [tex]E(X) = \$ 421.6[/tex]
Step-by-step explanation:
From the question we are told that
The probability that a 22 year old female in US will die within one year is p= 0.00044
The outcome if she dies within one year is that the company losses $30,000
Generally the probability that a 22 year old female in US will live more than one year is
[tex]q = 1 -p[/tex]
=> [tex]q = 1 -0.00044[/tex]
=> [tex]q = 0.99956[/tex]
The outcome if she lives more than one year is that the company gains $435
Generally the the company's expectation is mathematically represented as
[tex]E(X) = -30000 * p + 435 * q[/tex]
The negative sign shows that the company is loosing the fund
So
[tex]E(X) = -30000 * 0.00044 + 435 * 0.99956[/tex]
=> [tex]E(X) = \$ 421.6[/tex]
