Is this right? **Avicenna Life Insurance Policies Analysis**Avicenna, a major insurance company, offers five-year life insurance policies to 65-year-olds. If the holder of one of these policies dies before the age of 70, the company must pay out $27,400 to the beneficiary of the policy. Executives at Avicenna are considering offering these policies for $765 each. Suppose that for each holder of a policy, there is a 3% chance that they will die before the age of 70 and a 97% chance that they will live to the age of 70.**Analysis Question:**>If the executives at Avicenna know that they will sell many of these policies, should they expect to make or lose money from offering them? How much?>To answer, take into account the price of the policy and the expected value of the amount paid out to the beneficiary.**Options:**1. **Avicenna can expect to make money from offering these policies.** - *In the long run, they should expect to make ____ dollars on each policy sold.*2. **Avicenna can expect to lose money from offering these policies.** - *In the long run, they should expect to lose $7,248.45 dollars on each policy sold.*3. **Avicenna should expect to neither make nor lose money from offering these policies.***Selected Answer:**- Avicenna can expect to lose money from offering these policies. - In the long run, they should expect to lose $7,248.45 dollars on each policy sold.**Explanation:**This analysis requires calculating the expected value of the insurance payout and comparing it against the policy price. Based on the given probabilities and the payout value, the calculation shows that Avicenna would expect a significant loss per policy.

Answered: Image /qna-images/answer/af557117-6502-43a5-af48-6f33df4c2b79.jpg

Avicenna, a major insurance company, offers five-year life insurance policies to 65-year-olds. If the holder of one of these policies dies before the age of 70, the P company must pay out $27,400 to the beneficiary of the policy. Executives at Avicenna are considering offering these policies for $765 each. Suppose that for each holder of a policy there is a 3% chance that they will die before the age of 70 and a 97% chance they will live to the age of 70. If the executives at Avicenna know that they will sell many of these policies, should they expect to make or lose money from offering them? How much? To answer, take into account the price of the policy and the expected value of the amount paid out to the beneficiary. O Avicenna can expect to make money from offering these policies. In the long run, they should expect to make dollars on each policy sold. Avicenna can expect to lose money from offering these policies. In the long run, they should expect to lose 7.248.45 7.248.45 dollars on each policy sold. O Avicenna should expect to neither make nor lose money from offering these policies.

Avicenna, a major insurance company, offers five-year life insurance policies to 65-year-olds. If the holder of one of these policies dies before the age of 70, the P company must pay out $27,400 to the beneficiary of the policy. Executives at Avicenna are considering offering these policies for $765 each. Suppose that for each holder of a policy there is a 3% chance that they will die before the age of 70 and a 97% chance they will live to the age of 70. If the executives at Avicenna know that they will sell many of these policies, should they expect to make or lose money from offering them? How much? To answer, take into account the price of the policy and the expected value of the amount paid out to the beneficiary. O Avicenna can expect to make money from offering these policies. In the long run, they should expect to make dollars on each policy sold. Avicenna can expect to lose money from offering these policies. In the long run, they should expect to lose 7.248.45 7.248.45 dollars on each policy sold. O Avicenna should expect to neither make nor lose money from offering these policies.

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

See similar textbooks