SOLUTION: A 35-year-old woman purchases a $100,000 term life insurance policy for an annual payment of $360. Based on a period life table for the U.S. government, the probability that she wi
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Question 865549: A 35-year-old woman purchases a $100,000 term life insurance policy for an annual payment of $360. Based on a period life table for the U.S. government, the probability that she will survive this year is 0.999057. Find the expected value of the policy for the insurance company.
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
A 35-year-old woman purchases a $100,000 term life insurance policy for an annual payment of $360. Based on a period life table for the U.S. government, the probability that she will survive this year is 0.999057. Find the expected value of the policy for the insurance company.
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Random gain for the company:: 360...........-99,640
Probabilities..............0.999057....... 0.000943
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Expected gain = 0.999057*360 - 0.000943*99640 = $265.70
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Cheers,
Stan H.
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