Question: Suppose that a lifetime is either 1 year or 2 years uniformly. Our company has a 4000 benefit life insurance with this life. Assume a

Suppose that a lifetime is either 1 year or 2 years uniformly. Our company has a 4000 benefit life insurance with this life. Assume a constant force of interest of 0.01
a) If the life was in fact 1 year, then what is the present value of the benefits?
b) What are the chances that the present value of the benefits is the above?
c) What is the other possible value for the present value of the benefits of this insurance contract?
d) What is the mean of the present value of the benefits of this insurance contract?

Step by Step Solution

★★★★★

3.47 Rating (154 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Given a lifetime that is either 1 or 2 years uniformly a 4000 benefit life insurance and a constant ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Please write an summary according to the article. Please don't copy from others and write full view of article in the summary. Value creation. Wealth creation. These are really powerful words. Maybe...

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

At Acme Corp., the firm's senior managers approach marketing implementation with the belief that marketing strategy should be developed at the top of the organization and then transmitted to lower...

A marketing firm is developing a new Web-based media campaign for a client. The following table describes the relationships among the activities that need to be completed. (a) Develop a project...

Old Turkey Mash is a whiskey manufactured by distilling grains and corn and then aging the mixture for five years in 50- gallon oak barrels. Distilling requires about a week and aging takes place in...

1. What is the aim of classroom management? A. To keep an orderly classroom B. To establish the primacy of the teacher C. To sustain a quiet and disciplined environment D. To maintain a positive...

On January 2, 2015, the Matthews Band acquires sound equipment for concert performances at a cost of $65,800. The band estimates it will use this equipment for four years, during which time it...

National Car Rental maintains a detailed database of its inventory (cars to rent) and customers. Customers rent a car mainly for two purposes: business and leisure. For each customer, National...

How different is the NEO Window Shopping script from the traditional window shopping script? How many different analogous scripts would consumers have to draw on to build their expertise in using the...

A. Entries for Issuing and Calling Bonds; Gain Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $1,823,000 of 15-year, 14% callable bonds on May...

A company named Contoso, Ltd. is migrating its legacy PBX system to Microsoft Teams Phone. As a Microsoft Teams administrator you want a single provider for Teams Phone and the PSTN carrier. What...

1.) On May 22, 2010, Nicanor bought house and lot valued at Php 10,000,000 paying 20% down-payment with the balance payable in 10 years. On September 30, 2019, Nicanor died. The fair market value at...

Tasks: 1. Using the above provided IP address and your learnings from class, configure the topology. 2. Please retain the interface names and IP addresses for network namespaces as shown in topology....

For a picnic, Julie brings a cylindrical cooler jug filled with cold lemonade. She also brings paper cone cups in which to serve the lemonade. 30 cm 50 cm 6 cm 10 cm Given the dimensions of the jug...

1 . 1 . From the RedPharm data, determine: a . . The average number of customer arrivals for each hour Time Block Average per Time Block 7:00-8:00 11.87 8:00-9:00 11.96 9:00-10:00 12.27 10:00-11:00...

Prepare Accounting Equations, Journal, Ledgers and Trial Balance 1. Murali started business with Cash Rs. 2,00,000 and Bank 5,00,000. 2. Loan taken from HDFC for Rs. 4,50,000. 3. Purchased Stock for...

A red card is illuminated by red light. What color will the card appear? What if its illuminated by blue light?

Bev and Ken Hair have been married for 3 years. They live at 3567 River Street, Springfield, MO 63126. Ken is a full-time student at Southwest Missouri State University (SMSU) and Bev works as an...

Van makes an investment in a partnership in 2012. Van's capital contributions to the partnership consisted of $30,000 cash and a building with an adjusted basis of$70,000, subject to a nonrecourse...

Marty is a sales consultant. Marty incurs the following expenses related to entertainment of his clients in 2012: Dues to a country club......................................................$4,500...

Write the meaning of each of the following terms without referring to the book (or your notes), and compare your definition with the version in the text for each: a. Dummy variable b. Omitted...

Use your own computers regression software and the weight (Y) and height (X) data from Table 1.1 to see if you can reproduce the estimates in Equation 1.19. There are two ways to load the data: You...

Not all regression coefficients have positive expected signs. For example, a Sports Illustrated article by Jaime Diaz reported on a study of golfing putts of various lengths on the Professional...