SOLUTION: An insurance company has written 50 policies for $80 comma 000, 100 policies for $45 comma 000, and 250 policies for $5000 for people of age 20. If experience shows
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Question 1149790: An insurance company has written 50 policies for $80 comma 000, 100 policies for $45 comma 000, and 250 policies for $5000 for people of age 20. If experience shows that the probability that a person will die at age 20 is 0.0011,
how much can the company expect to pay out during the year the policies were written? Answer by ikleyn(52847) (Show Source):
The condition must say (but missed to do it) that the policies are effective during one year
and that the probability to die 0.0011 relates to the age from 20 to 21.
The company expects to pay (0.0011*50*80000 + 0.0011*100*45000 + 0.0011*250*5000) = 10725 dollars.
