EspañolAvicenna, 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, thecompany must pay out $23,900 to the beneficiary of the policy. Executives at Avicenna are considering offering these policies for $956 each. Suppose that foreach holder of a policy there is a 4% chance that they will die before the age of 70 and a 96% 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 expectto 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 paidout to the beneficiary.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 dollars on each policy sold.O Avicenna should expect to neither make nor lose money from offering these policies.8Þ>

Generally, most insurance companies generally price their policies as the total premium collected -…

policies to 63-yea company must pay out $23,900 to the beneficiary of the policy. Executives at Avicenn each holder of a policy there is a 4% chance that they will die before the age of 70 am If the executives at Avicenna know that they will sell many of these policies, shor 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 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. O Avicenna can expect to lose money from offering these policies. In the long run, they should expect to lose dollars on each policy sold. fforing these

policies to 63-yea company must pay out $23,900 to the beneficiary of the policy. Executives at Avicenn each holder of a policy there is a 4% chance that they will die before the age of 70 am If the executives at Avicenna know that they will sell many of these policies, shor 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 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. O Avicenna can expect to lose money from offering these policies. In the long run, they should expect to lose dollars on each policy sold. fforing these

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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