Probabilities and expected values

Reference no: EM1390807

Sarah is a 60 year old Anglo female in reasonably good health. She wants to take out a $50,000 term life insurance policy until she is 65. The policy will expire on her 65th birthday.The probability of death in a given year is provided by the Vital Statistics section of the Statistical Abstract of the United States.

x = age (years)| 60 61 62 63 64

P ( death at this age)| 0.00756 0.00825 0.00896 0.00965 0.01035

Sarah is applying to Big Rock insurance Company for her term insurance policy.

a) What is the probability that Sarah will die in her 60th? Using this probability and the $50,000 death benefit, what is the expected loss to Big Rock Insurance?

b) Repeat part (a) for year 61,62,63, and 64. What would be the total expected loss to Big Rock Insurance over the years 60 through 64?

c) If Big Rock Insurance wants to makes a profit of $700 above the expected total loss paid out for Sarah's death, how much should it charge for the policy?

d) If Big Rock Insurance Company charges $5000 for the policy, how much profit does the company expect to make?

Reference no: EM1390807

Questions Cloud

What is the maximum possible output per week : The line will operate for 6 hours per shift, 1 shifts per day, 6 days per week. What is the maximum possible output per week for this line?

Determine the width of the central highest : Light of wavelength 650 nm falls on a 0.48 mm wide slit and forms a diffraction pattern on a screen 1.8 m away.

What is the orbital speed of the second satellite : The orbit of this second satellite has a radius of 8.45 x10^6 m. What is the orbital speed of the second satellite.

Explain why do you assume which best buy rather than one : Explain why do you Assume which Best Buy, rather than one of Best Buy's big suppliers such as Sony or Panasonic, is considering eliminating rebates?

Probabilities and expected values : Sarah is a 60 year old Anglo female in reasonably good health. She wants to take out a $50,000 term life insurance policy until she is 65.

What is the distance separating the violet : What is the distance (in mm) separating the violet (lambda = 400nm) in the first-order band from the red (lambda = 600nm) in the second order.

Discussion of the exsisting system : Discussion of the exsisting system and brief discussion of the current standard used to manage forms - manage the transistion to a scanned form.

What is the minimum sales quantity that would justify : purchase new equipment at a net fixed cost of $63,000. If the firm chooses to make modifications, variable materials and labor will be $27.0 per board. What is the minimum sales quantity that would justify the purchase of new equipment

Find out the value cost-effectiveness and success of hiv : Find out the value, cost-effectiveness and success of HIV/AIDS prevention strategies and education efforts and make at least two (2) recommendations for improvement. Provide specific examples to support your response.

User Account

All Pages