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7 September, 13:45

Kyle has to make a decision about his health insurance. Under one plan, the monthly cost of insurance is $15, but if he visits a doctor, he has to pay $50 for an office visit.

Kyle estimates that he has a 0.05 probability of needing to visit a doctor in any given month.

What is the expected monthly value of this plan for Kyle?

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  1. 7 September, 16:24
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    100 - 0.05 = 0.95

    Expected monthly cost =

    Monthly cost x 0.95 + office visit x 0.05

    15 x 0.95 + 50 x 0.05

    14.25 + 2.50 = $16.75
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