There is a 0.9986 probability that a randomly selected 30-year-old male lives through the year (based on data from the U.S. Department of Health and Human Services). A Fidelity life insurance company charges $161 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $100,000 as a death benefit.
a. From the perspective of the 30-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving?
b. If a 30-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?