Question

It is estimated that are 21 deaths for every 10 million people who use airplanes. A company that sells flight insurance provides 100,000 in case of death in a plane crash. A policy can be purchased for $1. Calculate the expected value and thereby determine how much the insurance can make over the long run for each policy it sells.

Answer 1

10 million people = 10 million dollars in revenue
21 deaths = 2.1 million dollars in losses

profit is thus 7.9 million dollars for 10 million policies. That's 79¢/policy