help with fractions?? :/

Question

An insurance company sells a $4,000, seven-year term life insurance policy to an individual for $240. Find the expected return for the company if the probability the individual will live for the next seven years is 0.99. (Round your answer to the nearest cent.)

dont get this :/

Answer 1

The insurance company has to pay $4,000 only if the individual dies within the next 7 years. Since the probability that the individual dies in 7 years is 1- .0.99 is 0.01, then the risk is $4,000 * 0.01 = $40. The expected return of the insurance company is $240-$40 or $200.00