Question #8451
FIND THE EXPECTED VALUE USING ADDITION RULES:
A 35 year old woman purchases a $100,000 term life insurance policy for an annual payment of $360. Based on a period life table for the U.S. government , the probability that she will survive the year is 0.999057. Find the expected value of the policy for the insurance company.
could you show me how this is done.
A 35 year old woman purchases a $100,000 term life insurance policy for an annual payment of $360. Based on a period life table for the U.S. government , the probability that she will survive the year is 0.999057. Find the expected value of the policy for the insurance company.
could you show me how this is done.
Expert's answer
The expected payout for each of the insured in a given year:
1-0.999057 = 0.000943*100.000 = $94.3
Thus, their profit for the first year is
$360 - $94.3 = $265.7.
1-0.999057 = 0.000943*100.000 = $94.3
Thus, their profit for the first year is
$360 - $94.3 = $265.7.
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