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 you

a)Compute the expected value.

b)Interpret the expected value of this policy to the insurance company.

Expert Solution

a) Money made by the insurance company in case the person survives is equal to the premium = $350

and Money made by the insurance company in case the person does not survive is computed as: = $350 - $250,000

= $ -249650

Therefore the expected value of the insurance policy to the insurance company here is computed as:

= Probability that the person survives * Money made by the insurance company in case the person survives + Probability that the person does not survive * Money made by the insurance company in case the person does not survive

= 0.998734*350 - 249650*(1 - 0.998734)

= 349.5569 - 316.0569

= 33.5

Therefore the expected value of the insurance policy to the insurance company is $33.5

orchestra answered 2 years ago

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.

Suppose a life insurance company sells a $190,000 one-year term life insurance policy to a 20-year-old...

Suppose a life insurance company sells a $190,000 one-year term life insurance policy to a 20-year-old female for $330. The probability that the female survives the year is 0.999502. Compute and interpret the expected value of this policy to the insurance company.

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.

Suppose a life insurance company sells a $160,000 one-year term life insurance policy to a 25-year-old...

Suppose a life insurance company sells a $160,000 one-year term life insurance policy to a 25-year-old female for $280. The probability that the female survives the year is 0.9996420 Compute and interpret the expected value of this policy to the insurance company. The expected value is $nothing. (Round to two decimal places as needed.)

Suppose a life insurance company sells a $190,000 one-year term life insurance policy to a 24-year-old...

Suppose a life insurance company sells a $190,000 one-year term life insurance policy to a 24-year-old female for $200. The probability that the female survives the year is .999461. Compute and interpret the expected value of this policy to the insurance company.

An insurance company sells a two-year term life insurance policy to an 80-year-old woman. The woman...

An insurance company sells a two-year term life insurance policy to an 80-year-old woman. The woman pays a premium of $1,000 per year. If she dies within one of the insured years, the insurance company will pay $20,000 to her beneficiary. According to the US Centers for Disease Control and Prevention, the probability that an 80-year-old woman will be alive one year later is 0.9516 and the probability that an 80-year-old woman will be alive two years later is 0.9512...

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.

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 $______

An insurance company sells a $17,500, three-year term life insurance policy to an individual for $675....

An insurance company sells a $17,500, three-year term life insurance policy to an individual for $675. Find the expected return for the company if the probability the individual will live for the next three years is 0.99. (Round your answer to the nearest cent.)

Question