Maybe you have considered buying a term life insurance policy. The expected value of any term...

Maybe you have considered buying a term life insurance policy. The expected value of any term life insurance product yields a positive expected value for the insurance company and a negative expected value for you, meaning the insurance company will make profits by selling their insurance products. Would you still buy the term life insurance? Why or why not? Are there other examples other than insurance that uses this same concept?

Solutions

Expert Solution

orchestra answered 1 year ago

Next > < Previous

Related Solutions

An insurance company will pay the face value of a term life insurance policy if the...

An insurance company will pay the face value of a term life insurance policy if the insured person dies during the term of the policy. For how much should an insurance company sell a 10-year term policy with a face value of $40,000 to a 30-year-old man for the company to make a profit? The probability of a 30-year-old man living to age 40 is 0.97. Explain your answer. Remember that the customer pays for the insurance before the policy...

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will...

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $28618 per year forever. If the required return on this investment is 7 percent, how much will you pay for the policy?

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will...

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $30,000 per year forever. Suppose a sales associate told you the policy costs $475,000. At what interest rate would this be a fair deal? (Round your answer to 2 decimal places. (e.g., 32.16))

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will...

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $ 25,000 per year forever. If the required return on this investment is 8 percent, how much will you pay for the policy?

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will...

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $29150 per year forever. If the required return on this investment is 7.2 percent, how much will you pay for the policy? (Round time value factors to 6 decimal places and final answer to the nearest dollar amount.)

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will...

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $26,000 per year forever. If the required return on this investment is 5.3 percent, how much will you pay for the policy? Present Value?

1. The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that...

1. The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $35,000 per year forever. Suppose a sales associate told you the policy costs $800,000. At what interest rate would this be a fair deal? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 2. Your credit card company charges you 1.41 percent per month. What is the EAR...

An insurance company considers the present value of a 10-year term life insurance policy to be...

An insurance company considers the present value of a 10-year term life insurance policy to be $3,738. The premiums that the company collects are $55 at the beginning of every month for the 10 years. What monthly compounded nominal rate is implied in the calculation of the policy's value? A lottery prize of $2,250,000 per year, payable at the beginning of every year for 20 years can also be collected as a single lump sum payment of $23,500,000. What effective...

You have the opportunity to purchase a $150,000 Term life insurance policy for $145 per year...

You have the opportunity to purchase a $150,000 Term life insurance policy for $145 per year for the next four years. Your bank has offered you credit life insurance in conjunction with a $12,000 four-year (48-month) loan you are applying for. The credit life insurance premium would be a one-time-up-front fee of $325. What is the annual cost per $1,000 of insurance for the term life insurance and the credit life insurance? $0.97 per thousand for Term Life Insurance and...

Prudent policy life insurance co. offers a 10 year term life insurance policy with a $250000...

Prudent policy life insurance co. offers a 10 year term life insurance policy with a $250000 benefit and annual premiums of $200, paid at the beginning of each year. If prudent can earn 8% on invested capital, what is the present value to the firm of the premiums from one policy, assuming the policy holder outlives the policy term?

Subjects