Life Insurance Project, Part 2: A group of 10,000 people, each now 55 years old, is to be insured as described in 9. Upon the death of the insured person at any age from 55 through 59, his or her survivors receive $20,000. Your job is to calculate the annual premium that should be charged for this policy. Here is the portion of the mortality table that applies to this age group. a. Make a table showing D(x), A(x), and O(x), the numbers of deaths, the number still alive, and the amount paid out in death benefits, respectively. b. An administrator is to be paid $30,000 a year to operate the program. Calculate the total paid out by the company over the fiveyear period, including the administrators salary and death benefits. c. Calculate the total income from premiums for the five-year period, taking into consideration the fact that the number of premiums received each year decreases after the first year as the insured persons die. From the result, calculate the premium that must be charged per person per year for the company to break even. d. Why is the premium in part c so much higher than the $40 per year in 9?
Week 8 notes Announcements: Exam 2 will be administered next Thursday. A supply curve shows the minimum price a firm will accept per unit of good or service for a particular amount of goods or services. A producer surplus is the excess amount received from the sale of a good or service over the cost of producing it. Market failure results when a market delivers an inefficient outcome. Market failures are generally caused by market regulation: taxes, subsidies, quotas. Market failures can also be caused by high transaction costs, such as sales taxes or tariffs. A public good benefits everyone. Examples of public goods are libraries, sidewalks, roads, national parks, public education, etc. A common resource is owned by no one but can be used by everyone. Example: fish in the ocean. F