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Let denote the net gain to the company from the sale of a policy. There are two possibilities,
- The insured person dies before three years are over.
- The insured person lives the entire three year period
The probability in the second case is 0.9995 and in the first case, the probability is 1-0.9995=0.0005
The probability distribution of Y is
Y 2000 -998000
p(Y) 0.9995 0.0005
The expected value to the company of a single policy is 1500.