Provide an appropriate response.
-A 28-year-old man pays $181 for a one-year life insurance policy with coverage of $150,000. If the probability that he will live through the year is 0.9994, what is the expected value for the insurance policy?
A) -$91.00
B) -$180.89
C) $90.00
D) $149,910.00

Question

Quizplus · Accepted Answer

The expected value is calculated as: (probability of living * loss if living) + (probability of dying * gain if dying). This is (0.9994 * -$181) + (0.0006 * $149,819) = -$180.89.

Provide an Appropriate Response