A life insurance company sells a $150,000 one year term life insurance policy to a 21-year old female for $150. The probability that the female survives the year is. 999724. Find the expected value for the insurance company.

EV = $108.56

The expected value for the insurance company is $108.56

Step-by-step explanation:

Expected value is used by insurance companies to weigh the risk and the benefits on an insurance policy.

EV = P*I - P'*R

Where

P = probability of not dying = 0.999724

P' = probability of dying = (1-0.999724)

I = Investment = $150

R = return = $150,000

EV = 0.999724*150 - (1-0.999724) * 150000

EV = $108.5586

EV = $108.56

The expected value for the insurance company is $108.56