Question
An insurance company offers MS adults between the ages of 25 and 34 a $100,000 life insurance policy for $18 a month. They use the
An insurance company offers MS adults between the ages of 25 and 34 a $100,000 life insurance policy for $18 a month. They use the fact that MS has a yearly death rate of 172.8 per 100,000 residents aged 25-34. If the insurance company has 10,000 customers with these life insurance policies in Mississippi, what is its profit at the end of the year?
Answer from your tutor:
Report this answer
onkwonkwoAnswered22 minutes ago
its profit at the end of the year
=$428270
Please rate positive
God bless
Explanation:
p (death) = .001728
E(X) for 1 year = ?
Since it is for 1 year, we will have 12 installments of $18.
= p1*x1 +p2*x2
= .001728*100000 - (1-.001728)*18*12
= -$42.827
expected value is a profit of of $42.827 per customers for the insurance company at the end of 1 year of the stated policy
and they were 10,000 customers,
expected profit
=$42.827*10000
$428270
Why did you use (1- .001728) - explain the use of 1 -
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started