How much money on average will an insurance company make off of a 1-year life insurance...

How much money on average will an insurance company make off of a 1-year life insurance policy worth $50,000, if they charge $800.00 for the policy, and you have a 0.9999 probability of surviving the year?

When I tried solving this, I ended up with $750.72 but the answer key says $795

Expert Solution

P(surviving the year) = 0.9999

P(not surviving the year) = 1 - P(surviving the year) = 1 - 0.9999 = 0.0001

Company will gain $800 when the person survives.

Company will loose 50000 - 800 = $49200 when person does not survive.

Expected value = 800 * 0.9999 - 49200 * 0.0001 = $795 (ans)

orchestra answered 2 years ago

A small insurance company, is trying to decide how much money to keep in liquid asset...

A small insurance company, is trying to decide how much money to keep in liquid asset to cover auto insurance claims. The company holds some of the premiums it receives in interest bearing checking accounts and puts the rest into investments that are not quite as liquid, but generate a higher return. The company wants to study cash flows to determine how much money it should keep in liquid assets to pay claims. A review of the company’s data has...

A life insurance company sells a $250,000 1-year term life insurance policy to a 20-year old...

A life insurance company sells a $250,000 1-year term life insurance policy to a 20-year old male for $350. The probability this person survives the year is 0.98734. Compute the expected value of this policy to the insurance company to the nearest 0.01.

Life Insurance:A life insurance company sells a$250,000 1-year term life policy to a 20-year-old...

Life Insurance:A life insurance company sells a $250,000 1-year term life policy to a 20-year-old male for $350. According to the National Vital Statistics Report, the probability that the male survives the year is 0.998734.Please answer all questions and do not hand write your answers. Show your work or please leave the question for someone who can. Thank youa)Compute the expected value.b)Interpret the expected value of this policy to the insurance company.

A life insurance company sells a $150,000 one year term life insurance policy to a 21-year...

A life insurance company sells a $150,000 one year term life insurance policy to a 21-year old female for $150. The probability that the female survives the year is .999724. Find the expected value for the insurance company.

How much are you going to pay? How much insurance company pays?

Use the following information to answer the following questions deductible: $1000 coinsurance: 20% out-of-pocket maximum: $8000 let's say you have $30000 in covered medical expenses in January: How much are you going to pay? How much insurance company pays? if you have an additional $20000 in medical expenses: how much are you going to pay? how much insurance company pays?

Suppose a life insurance company sells a $290,000 a year term life insurance policy to a...

Suppose a life insurance company sells a $290,000 a year term life insurance policy to a 20-year-old female for $200. The probability that the female survives the year is 0.999634. compare and interpret the expected value of this policy to the insurance company. the expected value is $___ (round to two decimal places as needed)

suppose a life insurance company sells a $240,000 one year term life insurance policy to a...

suppose a life insurance company sells a $240,000 one year term life insurance policy to a 19 year old female for $270. the probability that the female survives the year is .999522. compute and interpret the expected value if this policy to the insurance company. the expected value is $______

Life Insurance: A life insurance company wants to estimate the probability that a 40-year-old male will...

Life Insurance: A life insurance company wants to estimate the probability that a 40-year-old male will live through the next year. In a sample of 7000 such men from prior years, 6993 lived through the year. Use the relative frequency approximation to estimate the probability that a randomly selected 40-year-old male will live through the next year. Round your answer to 4 decimal places. P(he lives through the year) =????

1. How much money do you need to save each year to be a millionaire by...

1. How much money do you need to save each year to be a millionaire by the time you are 65 if you can earn an interest rate of 8% and you start saving when you are 20 years old? Please use two decimals rounded up/down. 2. How much money do you need to save each year to be a millionaire by the time you are 65 if you can earn an interest rate of 8% and you start saving...

Suppose a life insurance company sells a $200,000 one-year term life insurance policy to a 23-year-old...

Suppose a life insurance company sells a $200,000 one-year term life insurance policy to a 23-year-old female for $190. The probability that the female survives the year is 0.999594. Compute and interpret the expected value of this policy to the insurance company.

Question