Answer:
The company earns $91 through the year.
Step-by-step explanation:
We are given the following information in the question:
Here, the insurance premium paid is $181.
The probability of survival = 0.9994.
The probability of death = 1 - Probability of survival = 1 - 0.9994 = 0.0006
Thus, we can write,
The company earns $181 with probability 0.9994 and pays out ($150000-$181) = $149,819 with probability .006.
The expected value of the policy or the expected earning for the company can be calculated in the following manner:
[tex]\text{Expected value of insurance} = \\(181 \times 0.9994) +((-149819) \times 0.0006) = 91[/tex]
Thus, the company earns $91 through the year.
