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A company offers health insurance to its employees. The insurance pays continuous premiums at the rate...

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Advance Math

A company offers health insurance to its employees. Theinsurance pays continuous premiums at the rate of $12,000/yearwhenever the employee is sick, and nothing otherwise. Suppose thata typical employee gets sick on average every 4 months ,and whensick remains so for an average of 1/2-months. The companyconstructs an appropriate continuous-time Markov chain to modelthis situation.

(a) Suppose an employee is healthy today. Find the totalexpected benefits that she will receive over the next year.

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