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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Your insurance company has a policy to ensure personal property. Assume you have a laptop worth $2,400 and there's a 4% chance that the laptop will be lost or stolen during the next year. What would be a fair premium for the insurance? We are assuming that the insurance company earns no profit
Suppose that you just bought a painting for $1million. You plan to sell it exactly one year fromnow. You don’t know what the exact price will bewhen you sell. Nevertheless, you believe thatthere’s a 65% chance that you can sell it for$1.2million, and a 35% chance that you can sell itfor only $900,000. What is your expected gain orloss for this investment?
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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.)
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