G - Applications of Expected Values - An insurance company sells a \$20,000 whole life insurance policy for an annual premium of \$300 Actuarial tables

# G - Applications of Expected Values - An insurance company...

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An insurance company sells a \$20,000 whole life insurance policy for an annual premium of\$300. Actuarial tables show that a person who would be sold such a policy with this premium hasa 0.001 probability of death during a year. Let x be a random variable representing the insurancecompany’s profit made on one of these policies during a year. Calculate the expected profit per year.
Belk Department Store is having a special sale this weekend. Customers charging pur-chases of more than \$50 to their Belk credit card will be given a special Belk Lotterycard. The customer will scratch off the card, which will indicate the amount to be takenoff the total amount of the purchase. Listed below are the amount of the prize and the per-cent of the time that amount will be deducted from the total amount of the purchase.What is the mean amount (expected value) deducted from the total purchase amount? Prize Amount Probability \$10 0.50 \$25 0.40 \$50 0.08 \$100 0.02 Expected Value \$21.00
The chance of winning a lottery game is 1 in approximately 28 million. Suppose you buy \$1 lottery ticketin anticipation of winning the \$6 million grand prize. Calculate your expected net winnings for this single ticket.Interpret the result. EventPrize (x)P(x)Win\$6,000,0003.571E-009Loss-\$10.9999999964 InterpretationYour average lossfor a large number of games would be0.78per game.(Choose one)value
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