Suppose a life insurance company sells a $250,000 one-year term life insurance policy to a 20-year-old female for $320. The probability that the female survives the year is 0.999647. Compute and interpret the expected value of this policy to the insurance company.

The expected value is equivalent to the current receivable payment minus any potential payouts. The insurance company is assured of the $320 payment they will receive. Then the probability that the female will not survive the year is 1 - 0.999647 = 0.000353. We multiply this probability by the value of $250,000 to get $88.25. Then we subtract $320 - $88.25 to get the expected value of $231.75.

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Suppose a life insurance company sells a ​$250,000 ​one-year term life insurance policy to a 20​-year-old female for ​$320. The probability that the female survives the year is 0.999647. Compute and interpret the expected value of this policy to the insurance company.

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Suppose a life insurance company sells a $250,000 one-year term life insurance policy to a 20-year-old female for $320. The probability that the female survives the year is 0.999647. Compute and interpret the expected value of this policy to the insurance company.