Solve the problem.
-An insurance company says that at age 50 one must choose to take $10,000 at age 60, $30,000 at 70, Or $50,000 at 80 ($0 death benefit). The probability of living from 50 to 60 is 0.87, from 50 to 70, 0.62, and from 50 to 80, 0.42. Find the expected value at each age.
A) $ 60: \$ 8700 $
$ 70: \$ 12,600 $
$ 80: \$ 21,000 $

B) $ 60: \$ 6200 $
$ 70: \$ 18,600 $
$ 80: \$ 21,000 $

C) 60: $ \$ 8700 $
70: $ \$ 18,600 $
80: \$21,000

D) 60: $ \$ 8700 $
$ 70: \$ 26,100 $
80: $ \$ 43,500 $

Question

Solve the problem.
-An insurance company says that at age 50 one must choose to take $10,000 at age 60, $30,000 at 70, Or $50,000 at 80 ($0 death benefit). The probability of living from 50 to 60 is 0.87, from 50 to 70, 0.62, and from 50 to 80, 0.42. Find the expected value at each age. 
A) $ 60: \$ 8700 $
$ 70: \$ 12,600 $
$ 80: \$ 21,000 $
 
B) $ 60: \$ 6200 $
$ 70: \$ 18,600 $
$ 80: \$ 21,000 $

C) 60: $ \$ 8700 $
70: $ \$ 18,600 $
80: \$21,000

D) 60: $ \$ 8700 $
$ 70: \$ 26,100 $
80: $ \$ 43,500 $

Quizplus · Accepted Answer

The expected value at each age is calculated by multiplying the probability of living to that age by the amount of money received at that age. For age 60, it's $0.87 \times \$10,000 = \$8,700$. For age 70, it's $0.62 \times \$30,000 = \$18,600$. For age 80, it's $0.42 \times \$50,000 = \$21,000$.

Solve the Problem 60:$8700 60: \$ 8700 60:$8700 70:$12,600 70: \$ 12,600 70:$12,600

Solve the Problem $60: \$ 8700$ $70: \$ 12,600$