Answer:
The expectation of the policy until the person reaches 61 is of -$4.
Step-by-step explanation:
We have these following probabilities:
0.954 probability of a loss of $50.
1 - 0.954 = 0.046 probability of "earning" 1000 - 50 = $950.
Find the expectation of the policy until the person reaches 61.
Each outcome multiplied by it's probability, so:
[tex]E = -0.954*50 + 0.046*950 = -4[/tex]
The expectation of the policy until the person reaches 61 is of -$4.
