20.20 Life insurance. You might sell insurance to a 20-year-old friend. The probability that aman aged 20 will die in the next year is about 0.0007. You decide to charge $2000 for apolicy that will pay $1 million if your friend dies.a. What is your expected profit on this policy?b. Although you expect to make a good profit, you would be foolish to sell a single policyonly to your friend. Why?C. A life insurance company that sells thousands of policies, on the other hand, would dovery well selling policies on exactly these same terms. Explain why.

Answered: Image /qna-images/answer/692bbc6e-a567-4e23-8e00-6be203ffaa90.jpg

Answered: 20.20 Life insurance. You might sell…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Charlie buys a one-year term home insurance policy for $p, that will pay $200,000 in the event of a major catastrophe and $35,000 in the event of a minor catastrophe. Charlie's home has a 0.2% chance of a major catastrophe and a 0.7% of a minor catastrophe during the one year term. What did the insurance company charge Charlie for this policy if the company expected to break even?
4. The student council is hosting a drawing to raise money for scholarships. They are selling tickets for $5 each and will sell 700 tickets. There is one $2,000 grand prize, three $400 second prizes, and twelve $40 third prizes. You just bought a ticket. Find the expected value for your profit. Round to the nearest cent.
1.A husband and wife take out an insurance policy for a 20 year term. It is estimated the probability of being alive in 20 years time is 0.8 for the husband, and 0.9 for the wife. What is the probability that in 20 years time, just one of them will be alive. Explain your reasoning carefully.
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K There is a 0.9986 probability that a randomly selected 32-year-old male lives through the year. A life insurance company charges $189 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $100,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 32-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is $ The value corresponding to not surviving the year is $ (Type integers or decimals. Do not round.)
You purchase a brand new car for $15,000 and insure it. The policy pays 78% of the car's value if there is an issue with the engine or 30% of the car's value if there is an issue with the speaker system. The probability of an issue with the engine is 0.009, and the probability there is an issue with the speaker system is 0.02. The premium for the policy is p. Let X be the insurance company's net gain from this policy. (a) Create a probability distribution for X, using p to represent the premium on the policy. Enter the possible values of X in ascending order from left to right. P(X) (b) Compute the minimum amount the insurance company will charge for this policy. Round your answer to the nearest cent
6. Suppose you roll a six-sided die once. The pay out is as follows. A 1, 3, or 5 pays $2.00. A 2 or 4 pays $3.00. A 6 pays nothing. What is the expected pay out?
Suppose best buy offers an extended warranty for $25 on an electronic device whose value is $250. Suppose best buy estimates the probability the item will be returned for a claim on that warranty is 5%. Assume that if an item is returned, best buy will refund the $250 purchase price. What is best buys expected value on the warranty?
There is a 0.9984 probability that a randomly selected 31-year-old male lives through the year. A life insurance company charges $159 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $80,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 31-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is $ The value corresponding to not surviving the year is $ (Type integers or decimals. Do not round.)
Suppose that you are offered the following "deal." You roll a six sided die. If you roll a 6, you win $12. If you roll a 3, 4 or 5, you win $5. Otherwise, you pay $6.a. Complete the PDF Table. List the X values, where X is the profit, from smallest to largest. Round to 4 decimal places where appropriate. X P(X) b. Find the expected profit. $ (Round to the nearest cent)c. Interpret the expected value. This is the most likely amount of money you will win. You will win this much if you play a game. If you play many games you will likely win on average very close to $2.50 per game. d. Based on the expected value, should you play this game? Yes, since the expected value is 0, you would be very likely to come very close to breaking even if you played many games, so you might as well have fun at no cost. No, this is a gambling game and it is always a bad idea to gamble. Yes, since the expected value is positive, you would be very likely to come home with more…
Round to the nearest cent
Carlie is betting on a game in which each bet has an expected value of -$0.56. This implies A. Carlie will win $0.56 every time she plays the game. B. Carlie will lose $0.56 every time she plays the game. C. if Carlie plays the game many times, on an average Carlie should expect to lose about $0.56 each game.Is it correct answer C?

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