Question

In: Statistics and Probability

A 35-year old woman purchases a $100,000 term lifeinsurance policy. Based on a a period...

A 35-year old woman purchases a $100,000 term life insurance policy. Based on a a period life table from the U.S. government, the probability that she will survive the year is 0.999057.

6. The cost of servicing the insurance policy is $53. What profit is realized by the company for this policy for this year?

Profit realized by the company: ______________

Solutions

Expert Solution

i am denoting gain of the company by +sign and loss by - sign.

X : the earning of the insurance policy.

the necessary probability distribution table be:-

X (in $) P(x)
53-100000 = -99947 (1-0.999057) = 0.000943
53 0.999057

the expected value of the policy for the insurance company be:-

the company will expect a loss of $ 41.3

orchestra answered 2 years ago
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