Avicenna, a major insurance company, offers five-year life insurance policies to 65-year-olds. If the holder of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Avicenna, a major insurance company, offers five-year life insurance policies to 65-year-olds. If the holder of one of these policies dies before the age of 70, the company must pay out $24,200 to the beneficiary of the policy. Executives at Avicenna are considering offering these policies for $573 each. Suppose that for each holder of a policy there is a 2% chance that they will die before the age of 70 and a 98% chance they will live to the age of 70. (If necessary, consult a list of formulas.) If the executives at Avicenna know that they will sell many of these policies, should they expect to make or lose money from offering them? How much? To answer, take into account the price of the policy and the expected value of the amount paid out to the beneficiary. Avicenna can expect to make money from offering these policies. In the long run, they should expect to make dollars on each policy sold. O Avicenna can expect to lose money yrom offering these policies. In the long run, they should expect to lose dollars on each policy sold. O Avicenna should expect to neither make nor lose money from offering these policies. Avicenna, a major insurance company, offers five-year life insurance policies to 65-year-olds. If the holder of one of these policies dies before the age of 70, the company must pay out $24,200 to the beneficiary of the policy. Executives at Avicenna are considering offering these policies for $573 each. Suppose that for each holder of a policy there is a 2% chance that they will die before the age of 70 and a 98% chance they will live to the age of 70. (If necessary, consult a list of formulas.) If the executives at Avicenna know that they will sell many of these policies, should they expect to make or lose money from offering them? How much? To answer, take into account the price of the policy and the expected value of the amount paid out to the beneficiary. Avicenna can expect to make money from offering these policies. In the long run, they should expect to make dollars on each policy sold. O Avicenna can expect to lose money yrom offering these policies. In the long run, they should expect to lose dollars on each policy sold. O Avicenna should expect to neither make nor lose money from offering these policies.
Expert Answer:
Related Book For
Posted Date:
Students also viewed these mathematics questions
-
Suppose that X is connected. Prove that if there is a nonconstant, continuous function f: X R, then X has uncountably many points.
-
Suppose that A is a square matrix and there is a vector, b, such that LS(A, b) has a unique solution. Prove that A is nonsingular. Give a direct proof (perhaps appealing to Theorem PSPHS) rather than...
-
A major insurance company is considering the implementation of project management. The majority of the projects in the company are two weeks in duration, with very few existing beyond one month. Can...
-
Since the early 2000s, there has been a significant increase in the price of corn-based ethanol. a. A key input in the production of corn-based ethanol is corn. Use an appropriate diagram to explain...
-
Do you think IBM's advertising campaigns have changed too often over the past 11 years? Were the changes made because the campaigns were not working well or was it an intentional evolution in the...
-
The government wants to discourage the consumption of sugary drinks and proposes introducing a 20 percent tax on them. A survey shows that the demand for sugary drinks is perfectly elastic and people...
-
To determine optimum condition for a circuit board, the effects of bond strength of FR-4 (an insulating substrate) and thickness of copper lamination on the current flow are studied in a \(2 \times...
-
Paige Company estimates that unit sales will be 10,000 in quarter 1, 14,000 in quarter2, 15,000 in quarter 3, and 18,000 in quarter 4. Using a sales price of $70 per unit, prepare the sales budget by...
-
What is the present value of 10 payments of $500 each received every 24 months at a discount rate of 12% compounded annually?
-
John Pinot is the marketing manager who is heading up the magazine promotion for the TZ Advantage tennis racquets. John already worked with a graphic artist and copy editor to produce the full-page...
-
Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the table below. Sales forecast Quarter in Coming Year First $492 Second...
-
On Monday, Constance advertised in a local newspaper that she would pay a reward of $1,000 to the person who found her pet dog, Buddy. Constance had lost Buddy when she had taken him for a walk at...
-
(a) The content of registers are given as follow: RO=0x00112233 R4=0x12345678 R1=0x11224466 R2=0x22668822 R3=0XABCDEF00 R5=0x10101100 R6=0x55000022 R7=0x40000000 Evaluate the following program ENTRY...
-
John, Hazel and Penny are neighbours. They have lived next to each other for many years and spend much time together on a daily basis going to restaurants, cafes and other social events. For several...
-
Mylne vient d'achever le dessin du prochain modle de voiture hybride d'une marque automobile. Elle est trs satisfaite du rsultat. Mylne est designer industrielle dans les transports et travaille son...
-
Henry was driving outside his home town of Oakland, California, when he was hit by a car driven by Tom who drove all the way from Portland, Oregon, his home, to see his father in San Francisco....
-
Constant growth valuation Thomas Brothers is expected to pay a $3.7 per share dividend at the end of the year (that is, D1 = $3.7). The dividend is expected to grow at a constant rate of 3% a year....
-
The baseball player A hits the ball from a height of 3.36 ft with an initial velocity of 34.8 ft/s. 0.14 seconds after the ball is hit, player B who is standing 15 ft away from home plate begins to...
-
Find the probability that a person aged 50 is still alive at age 70.
-
Percentage of variation: The following MINITAB output presents a multiple regression equation. a. What percentage of the variation in the response is explained by the multiple regression equation? b....
-
How's your mileage? Weight (in tons) and fuel economy (in mpg) were measured for a sample of seven diesel trucks. The results are presented in the following table. a. Compute the least-squares...
-
Brown India Limited manufactures office tables. Normal capacity of the factory is 60,000 tables per annum. Following are the cost and inventory details for the year 200506. Required: Carry out the...
-
Usha Corporation Ltd. sought the advice of an investment advisor for deployment of surplus funds of around Rs. 45 lakh in the stock market. The advisor advised to invest in Bhonsle India Ltd. and...
-
Ram Lakhan Company Ltd. produces one unit of product B by using one unit of raw material A. During 200506 A costed the company 4,200. Conversion cost was 850. As on 31st March 2006, being the...
Study smarter with the SolutionInn App