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Solution: Life Insurance A life insurance company sells a

Chapter 11, Problem 28AYU

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QUESTION:

Problem 28AYU

Life Insurance A life insurance company sells a $250,000 1-year term life insurance policy to a 20-year-old male for $350. According to the National Vital Statistics Report, 58(21), the probability that the male survives the year is 0.998734. Compute and interpret the expected value of this policy to the insurance company.

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QUESTION:

Problem 28AYU

Life Insurance A life insurance company sells a $250,000 1-year term life insurance policy to a 20-year-old male for $350. According to the National Vital Statistics Report, 58(21), the probability that the male survives the year is 0.998734. Compute and interpret the expected value of this policy to the insurance company.

ANSWER:

Answer :

Step 1 : A life insurance company sells a $250,000 1-year term life insurance policy to a 20-year-old male for $350.

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