Question

In: Statistics and Probability

Sam is applying for a single year life insurance policy worth $60,900.00. If the actuarial tables...

Sam is applying for a single year life insurance policy worth $60,900.00. If the actuarial tables determine that she will survive the next year with probability 0.996 , what is her expected value for the life insurance policy if the premium is $331.00 ?

--- Answer in monetary value$ must have exactly two decimal places

Solutions

Expert Solution

policy worth after death = $60,900

Policy premium for 1 year = $331

P(survival in 1 year) = 0.996

Thus, P(death in 1 year) = 1 - 0.996 = 0.004

Now, Sam's expected value for the life insurance policy

= policy worth after death *P(death in 1 year) - policy premium for 1 year*P(survival in 1 year)

= 60900*0.004 - 331*0.996

= 60900*0.004 - 331*0.996

= -86.08

Thus, answer is - $86.08


Related Solutions

Sam is applying for a single year life insurance policy worth $60,900.00. If the actuarial tables...
Sam is applying for a single year life insurance policy worth $60,900.00. If the actuarial tables determine that she will survive the next year with probability 0.996 , what is her expected value for the life insurance policy if the premium is $331.00 ?
Sam is applying for a single year life insurance policy worth $29,300.00.
Sam is applying for a single year life insurance policy worth $29,300.00. If the actuarial tables determine that she will survive the next year with probability 0.997, what is her expected value for the life insurance policy if the premium is $426.00?
What is a key requirement for applying for a life insurance policy loan?
What is a key requirement for applying for a life insurance policy loan?
1.Last year Robert transferred a life insurance policy worth $42,750 to an irrevocable trust with directions...
1.Last year Robert transferred a life insurance policy worth $42,750 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson, Danny, upon his graduation from college, or to Danny’s estate upon his death. Robert paid $14,250 of gift tax on the transfer of the policy. Early this year, Robert died and the insurance company paid $380,000 to the trust. What amount, if any, is included in Robert’s gross estate? 2. Angelina gave a parcel...
According to actuarial tables, life spans in the United States are approximately normally distributed with a...
According to actuarial tables, life spans in the United States are approximately normally distributed with a mean of about 75 years and a standard deviation of about 16 years. 1) Find the probability that a randomly selected person lives between 60 less than 90 years. 2) Find the probability that a randomly selected person lives less than 50 years or more than 100 years. 3) Find the probability that a randomly selected person lives exactly 75 years. 4) What age...
Walter owns a whole-life insurance policy worth $52,000 that directs the insurance company to pay the...
Walter owns a whole-life insurance policy worth $52,000 that directs the insurance company to pay the beneficiary $260,000 on Walter’s death. Walter pays the annual premiums and has the power to designate the beneficiary of the policy (it is currently his son, James). What value of the policy, if any, will be included in Walter’s gross estate upon his death?
Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the...
Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death. Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy. What value of the policy, if any, would be included in Ashley's estate upon her death?
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?
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)
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.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT