Suppose you work for an insurance company and you sell a $10,000 one-year term insurance policy...

Suppose you work for an insurance company and you sell a $10,000 one-year term insurance policy at an annual premium of $290. Actuarial tables show that the probability of death during the next year for a person of your customer’s age, sex, health, etc., is .001 . What is the expected gain (amount of money made by the company) for a policy of this type? [Hint: If the customer dies, the gain is negative because the company must pay $10,000, for a net ‘‘gain’’ of $ ( 290 -10,000 ) = $ -9,710.]

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Expert Solution

Rahul Sunny answered 2 years ago

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