Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The probability that a nondrinker will die in the coming year is 0.001%, and the probability that a severe alcohol abuser will die is 0.050%.
The probability that a nondrinker will die in the coming year is 0.001%, and the probability that a severe alcohol abuser will die is 0.050%. Find the fair premium an insurance company should charge for a $500,000 one-year term policy if it believes that 95% of its customers will be nondrinkers and 5% will be severe alcohol abusers. The loading for sales commissions, other operating expenses, and profit is 30% of each premium dollar. You may ignore investment income.
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