An insurance policy on an electrical devicepays a benefit of $4000 if the device fails during the first year. The amount of the benefit decreases by $1000 each succes-sive year until it reaches 0. If the device has not failed by the beginning of any given year, the probability of failure duringthat year is 0.4. What is the expected benefit under this policy?Choose one of the following. Source: Society of Actuaries.a. $2234 b. $2400 c. $2500 d. $2667 e. $2694

Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter12: Probability
Section12.4: Discrete Random Variables; Applications To Decision Making
Problem 44E
icon
Related questions
Topic Video
Question

An insurance policy on an electrical device
pays a benefit of $4000 if the device fails during the first year.

The amount of the benefit decreases by $1000 each succes-
sive year until it reaches 0. If the device has not failed by the

beginning of any given year, the probability of failure during
that year is 0.4. What is the expected benefit under this policy?
Choose one of the following. Source: Society of Actuaries.
a. $2234 b. $2400 c. $2500 d. $2667 e. $2694

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Discrete Probability Distributions
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, calculus and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Calculus For The Life Sciences
Calculus For The Life Sciences
Calculus
ISBN:
9780321964038
Author:
GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:
Pearson Addison Wesley,
College Algebra
College Algebra
Algebra
ISBN:
9781337282291
Author:
Ron Larson
Publisher:
Cengage Learning
Algebra & Trigonometry with Analytic Geometry
Algebra & Trigonometry with Analytic Geometry
Algebra
ISBN:
9781133382119
Author:
Swokowski
Publisher:
Cengage
College Algebra (MindTap Course List)
College Algebra (MindTap Course List)
Algebra
ISBN:
9781305652231
Author:
R. David Gustafson, Jeff Hughes
Publisher:
Cengage Learning
College Algebra
College Algebra
Algebra
ISBN:
9781938168383
Author:
Jay Abramson
Publisher:
OpenStax