Jim is a 60-year-old Anglo male in reasonably good health. He wants to take out a $50,000 term (i.e., straight death benefit) life insurance policy until he is 65. The policy will expire on his 65th birthday. The probability of death in a given year is provided. x = age 60 61 62 63 64 P(death at this age) 0.01012 0.01423 0.01711 0.02071 0.02209 Jim is applying to Big Rock Insurance Company for his term insurance policy. (a)  What is the probability that Jim will die in his 60th year? (Enter a number. Enter your answer to five decimal places.)

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
icon
Related questions
Topic Video
Question

Jim is a 60-year-old Anglo male in reasonably good health. He wants to take out a $50,000 term (i.e., straight death benefit) life insurance policy until he is 65. The policy will expire on his 65th birthday. The probability of death in a given year is provided.

x = age 60 61 62 63 64
P(death at this age) 0.01012 0.01423 0.01711 0.02071 0.02209

Jim is applying to Big Rock Insurance Company for his term insurance policy.

(a)

 What is the probability that Jim will die in his 60th year? (Enter a number. Enter your answer to five decimal places.)


Using this probability and the $50,000 death benefit, what is the expected cost to Big Rock Insurance (in dollars)? (Enter a number. Round your answer to two decimal places.)


(b)

 What is the expected cost to Big Rock Insurance for years 61, 62, 63, and 64 (in dollars)? (For each answer, enter a number. Round your answers to two decimal places.)
year 61 $ 
year 62 $ 
year 63 $ 
year 64 $ 

What would be the total expected cost to Big Rock Insurance over the years 60 through 64 (in dollars)? (Enter a number. Round your answer to two decimal places.)


(c)

 If Big Rock Insurance wants to make a profit of $700 above the expected total cost paid out for Jim's death, how much should it charge for the policy (in dollars)? (Enter a number. Round your answer to two decimal places.)


(d)

 If Big Rock Insurance Company charges $5000 for the policy, how much profit does the company expect to make (in dollars)? (Enter a number. Round your answer to two decimal places.)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps with 1 images

Blurred answer
Knowledge Booster
Discrete Probability Distributions
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, statistics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman