An insurance company sells an insurance policy to individuals for $1,000 per year. If the person dies that year, then the insurance company will pay the family $100,000. If the person becomes disabled and unable to work that year, then the insurance company will pay the family $50,000. Actuaries at the insurance company estimate that 1 out of 1,000 policy holders will die each year, and 2 out of 1,000 policy holders will become disabled. What is the expected profit per person per year for the insurance company?

Intermediate Algebra
19th Edition
ISBN:9780998625720
Author:Lynn Marecek
Publisher:Lynn Marecek
Chapter12: Sequences, Series And Binomial Theorem
Section12.3: Geometric Sequences And Series
Problem 12.57TI: What is the total effect on the economy of a government tax rebate of $1,000 to each household in...
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An insurance company sells an insurance policy to individuals for $1,000 per year. If the person dies that year, then the insurance company will pay the family $100,000. If the person becomes disabled and unable to work that year, then the insurance company will pay the family $50,000. Actuaries at the insurance company estimate that 1 out of 1,000 policy holders will die each year, and 2 out of 1,000 policy holders will become disabled. What is the expected profit per person per year for the insurance company?

 

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