Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your company sells life insurance. You charge a 50 year old man $75 dollars for a one year, $100,000 policy. If he dies over the
Your company sells life insurance. You charge a 50 year old man $75 dollars for a one year, $100,000 policy. If he dies over the next year you pay out $100,000. If he lives you keep the $75. Based on historical data (relative frequency approximation) the average 50 Year old man has a .9997 probability of living through the year. a) what is your expected profit of this policy? b) What is the break-even price of such a policy? What price should you charge to produce an expected profit of zero?
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