Answer to Question #318548 in Statistics and Probability for rail

Question

A. A life insurance company will sell a Php250,000 one-year term life insurance policy for members of armed forces of the Philippines for a premium of Php500.00. Let X denote the gain from the insurance company. Based on the collected data of the company, a member of the armed forces police has a 99.96% chance of surviving within one year. Let X the net gain of an insurance company from a single policy holder.

1. Complete the table below showing the probability distribution of X.

X 500 -249,500

P(x)

2. Find the expectation If you play a bet and Interpret the result.

E(X)=

3. Interpretation:​

Answer 1

$EX=500\cdot 0.9996-249500\cdot 0.0004=400$

The expectation is positive because company wants to gain money.