The company's expectation is $486.26.
Since the probability that an 80-year-old male in the U.S. will die within one year is approximately 0.069941, to determine, if an insurance company sells a one-year, $ 12,000 life insurance policy to such a person for $ 495, what is the company's expectation, the following calculation must be performed:
- (12000 x 0.069941 / 100) + (495 x (100 - 0.069941) / 100) = X
- -8.39292 + 494.65379205 = X
- 486.26 = X
Therefore, the company's expectation is $486.26.
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