A thirty year old women decides to pay $300 for a one-year life insurance policy with coverage of $100,000. The probability of her living through the year is 0.9976. What is her expected value for the insurance policy?

Question

anonymous · Answer

I have these four choices however I do not know how to approach this problem.
A) -$389.064	
B) -$59.28	
C) $59.28	
D) $389.064

razor99 · Answer

hold on dude i am figuring it out

razor99 · Answer

well i  think it would be A

anonymous · Answer

would you mind trying to explain?

razor99 · Answer

well thats just my guessing u know mind calculation i have never done these kinda question cuz i am in the 8th grade

anonymous · Answer

oh well thanks anywho, I really appreciate you trying.

kropot72 · Answer

The probability of the woman dying during the year is 1-0.9976 = 0.0024
The expected value is given by :
E(X) = (-300 * 0.9976) + (100000 * 0.0024) = You can calculate it.

anonymous · Answer

THANK YOU SOOO MUCH!!!!! LIFESAVER

kropot72 · Answer

You're welcome :)