Solve the problem.
-An insurance company has written 89 policies of $\$ 50,000,450$ of $\$ 25,000$, and 900 of $\$ 10,000$ on people of age 20. If the probability that a person will die at age 20 is .001, how much can the company expect to pay during the year the policies were written?
A) $\$ 0$
B) $\$ 2470$
C) $\$ 247,000$
D) $\$ 24,700$

Question

Quizplus · Accepted Answer

The expected value is the sum of the products of the possible outcomes and their probabilities. In this case, the possible outcomes are the amount of money the company will pay if a person dies at age 20, and the probabilities are the probabilities that a person will die at age 20. The expected value is therefore:$$E(X) = (50,000)(.001) + (25,000)(.001) + (10,000)(.001)(900) = 24,700$$

Solve the Problem $50,000,450\$ 50,000,450$50,000,450 Of $25,000\$ 25,000$25,000 , and 900 Of $10,000\$ 10,000$10,000

Solve the Problem $\$ 50,000,450$ Of $\$ 25,000$ , and 900 Of $\$ 10,000$