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Ivan
2 years ago
12

There is a 0.9991 probability that a randomly selected 31​-year-old male lives through the year. A life insurance company charge

s ​$166 for insuring that the male will live through the year. If the male does not survive the​ year, the policy pays out ​$90 comma 000 as a death benefit. Complete parts​ (a) through​ (c) below.
a. From the perspective of the 31-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving?
b. If the 31-year-old male purchases the policy, what is his expected value?
c. Can the insurance company expect to make a profit from many such policies? Why?
Mathematics
1 answer:
jarptica [38.1K]2 years ago
4 0

Answer:

a) Monetary values corresponding to the two events are:

-In case of surviving the year = -166$

-In case of a death in the year = 89834$

b) Expected value of the purchasing the insurance is -85 $

c) Yes, insurance company can make a profit with this policy.

Step-by-step explanation:

<em>a)</em> The man need to pay 166$ first to enroll the insurance policy. If he survives within a year, he will lose 166$. Otherwise, if he dies within a year he will profit 89834$.

<em>b)</em> Expected value of the purchasing the insurance as following:

<u>-In case of surviving the year: </u>

Value: -166$

Probability: 0,9991

<u>-In case of death in a year </u>

Value: 89834$

Probability: 0,0009

Expected value is E(x) = -166×0,9991 + 89834×0,0009 = -85 $

<em>c)</em> Lets consider that 10000 different 31 year old man enrolled to this insurance policy. According to probability of death, 9 out of 10000 man expected to be dead within the year. Therefore, company need to pay 9*90000 = 810000$ to their costumers. But, company will collect 10000*166=1660000$ from their costumers in the beginning of the year

So, it is expected that company is going to profit 1660000-810000=850000$ per year.

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Answer:

a) Probability that the claim is rejected when the actual value of p is 0.8 = P(X ≤ 15) = 0.0173

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Step-by-step explanation:

p is the true proportion of houses with smoke detectors and p = 0.80

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b) Probability of not rejecting the claim when p= 0.7 when p= 0.6

For us not to reject the claim, we need more than 15 houses with detectors, hence, th is probability = P(X > 15), but p = 0.7 and 0.6 respectively for this question.

n = total number of sample spaces = 25 houses sampled

x = Number of successes required = more than 15

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q = probability of failure = probability that a house does NOT have smoke detectors = 1 - p = 1 - 0.70 = 0.30

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when p = 0.60, error probability = P(X ≤ 14) = 0.4142

The error probabilities are evidently lower when 15 is replaced with 14 in the calculations.

Hope this Helps!!!

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