Question 271159: A 65 year old woman takes out a $100,000 term life insurance policy. The company charges an annual premium of $520. Estimate the company’s expected profit on such policies if the mortality tables indicate that only 2.6% of women age 65 die within a year.
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! A 65 year old woman takes out a $100,000 term life insurance policy. The company charges an annual premium of $520. Estimate the company’s expected profit on such policies if the mortality tables indicate that only 2.6% of women age 65 die within a year.
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Random profit values: -99,480, +520
Probabilities: 0.026, 0.974
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E(profit) = 0.026(-99480) + 0.974(520) = -$2080
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Cheers,
Stan H.
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