A 40-year-old man in the U. S. has a 0.246% risk of dying during the next year. An insurance company charges $250 per year for a life-insurance policy that pays a $100,000 death benefit. What is the expected value for the person buying the insurance

Expected value = 3.385

Explanation:

If an individual gets to benefit from an insurance policy, he will take insurance policy.

Expected value = (Probability of an event * Pay off for dying) - [ (1-Probability of an event) * Pay off for living]

Expected value = (0.246% * $100,000) - [ (1-0.246%) * $250]

Expected value = ($246) - [0.99754 * $250]

Expected value = ($246) - [249.385]

Expected value = 3.385