00:01
So for this problem, i'm going to start off by making note that it depends on the perspective that we're taking here.
00:14
From the perspective of the insurance company, we'd have that, well, their expected value for an individual would be equal to the probability of illness.
00:31
So i'll just call that probability of ill times their payout amount.
00:39
Or pardon me, i'll note that the payout amount would be a negative value.
00:46
So just to formalize that, i'll say it's the probability of illness times the negative payout amount.
00:52
Basically, their expected value would be negative because they're paying out the money.
00:58
And then we would have plus the probability of healthy times the insurance rate.
01:08
So we'll call it times r...