Assume that SSS hires you to evaluate one of your insurance. This insurance is life insurance...

Assume that SSS hires you to evaluate one of your insurance. This insurance is life insurance with an annual premium of $ 300.00 (what the insured pays for insurance). If the insured person dies during the year SSS pays its beneficiaries $ 14,000.00 and the probability that the person dies during the year is 0.10, then determine the expected annual profit by SSS with this type of insurance in one year.

Expert Solution

Profit when person does not die = 300

Loss when person dies = 14000 - 300 = 13700

Expected annual profit = 300 * (1 - 0.1) - 13700 * 0.1 = $-1100

The expected annual loss by SSS is $1100

orchestra answered 2 years ago

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