Finding Expected Value for a Life Insurance Policy The CNA Insurance Company charges Mike
January 12th, 2018
13. Finding Expected Value for a Life Insurance Policy The CNA Insurance Company charges Mike $250 for a one-year $100,000 life insurance policy. Because Mike is a 21-year-old male, there is a 0.9985 probability that he will live for a year (based on data from U.S. National Center for Health Statistics).a. From Mike’s perspective, what are the values of the two different outcomes?b. If Mike purchases the policy, what is his expected value?c. What would be the cost of the insurance policy if the company just breaks even (in the long run with many such policies), instead of making a profit?