Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000
Question:
Sara is applying to Big Rock Insurance Company for her term insurance policy.
(a) What is the probability that Sara will die in her 60th year? Using this probability and the $50,000 death benefit, what is the expected cost to Big Rock Insurance?
(b) Repeat part (a) for years 61, 62, 63, and 64. What would be the total expected cost to Big Rock Insurance over the years 60 through 64?
(c) If Big Rock Insurance wants to make a profit of $700 above the expected total cost paid out for Sara€™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?
Step by Step Answer:
Understanding Basic Statistics
ISBN: 9781111827021
6th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase