Question

A thirty year old women decides to pay $390 for a one-year life insurance policy with coverage of $150,000. The probability of her living through the year is 0.9976. What is her expected value for the insurance policy?

Answer 1

Well, we can change that decimal into 99%, so she has a 99% or 99.76%. Now divide $150,000 / 99.76 = 1503.60866 or $1503.60. Hope I helped 

Answer 2

The expected value is −390(0.9976) + (150,000 − 390)( 1 − 0.9976) = −$30

-$30 is your answer.