An insurance company has written 59 policies of $50,000, 457 of $25,000, and 943 of $10,000 on people of age 20. If the probability that a person will die at age 20 is .001, how much can the company expect to pay during the year the policies were written?
Isn't the probability that a person will die at age 20 and have a $50,000 policy
? Therefore, the expected value is
. My teacher disagreed, saying not to divide by 1459 (the total number of policies). She argued the expected value was
.
A validation of either argument would be appreciated.