Question: An insurance company charges a 21 year old male a premium of $500 for a one year $100,000 life insurance policy. A 21 year old male has a 0.999 probability of living for a year.

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

The value if he lives is ___ dollars

The value if he dies is ___ dollars.

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

The expected value is __ dollars.

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