Question: The CAN Insurance Company charges a 21-year-old male a premium of $250 for a one-year $100,000 life insurance policy. A 21-year-old male has a 0.9985 probability of living for a year (based on data from the National Center for Health Statistics).

a) From the perspective of a 21-years-old male (or his estate), what are the values of the two different outcomes?

b) What is the expected value for a 21-year-old male who buys the insurance?

c) What would be the cost of the insurance policy if the company just breaks even (in the long run with many such policies), instead of making a profit?

d) Given that the expected value is negative so that the insurance company can make a profit, why should a 21-year-old male or anyone else purchase life insurance?