Problem #4 - Life Insurance A life insurance company sells $250,000 1-year term life insurance policy to a 20-year old for $200. According to the National Vital Statistics Report, the probability that a 20-year old survives the year is 0.999544. Compute the expected value for this policy.

Problem #4 - Life Insurance A life insurance company sells $250,000 1-year term life insurance policy to a 20-year old for $200. According to the National Vital Statistics Report, the probability that a 20-year old survives the year is 0.999544. Compute the expected value for this policy.

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

Related questions

Q: Suppose a life insurance company sells a $250,000 1-year term life insurance policy to a 20-year-old…

A: Cost of policy = $350 Value o the policy , x = $250,000 If the women is not alive, the company has…

Q: An insurance company sells a $10,000 1-year term life insurance policy to people aged 70 - 79 for…

Q: Based on historical data, an insurance company estimates that a particular customer has a 2.7%…

A: We are given that,Based on historical data, an insurance company estimates that a particular…

Q: If 10% of the time Danny makes guacamole twice a month, 35% of the time he makes guacamole once a…

A: Using the given information we make a table Number of times (xi) 2 1 0 probability (pi)…

Q: Based on historical data, an insurance company estimates that a particular customer has a 1.2%…

A: Given information- We have given that- Probability of a particular customer of having an accident in…

Q: Based on historical data, an insurance company estimates that a particular customer has a 2.3%…

Q: Based on historical data, an insurance company estimates that a particular customer has a 2.4%…

A: Answer: an insurance company estimates that a particular customer has a 2.4% likelihood of having an…

Q: Exclude leap years from the following calculations. (a) Compute the probability that a randomly…

A: Note- As per our policy we can answer only the first 3 sub-parts of a question. If you want…

Q: he probability that an 80-year-old male in the U.S. will die within one year is approximately…

A: given data, probability that an 80- year old male die in the U.S. within one year is approximetly…

Q: The probability that a 28-year old male in the US will die within one year is approximately 0.001…

A: Given information:Probability that a 28-year old male in the US will die within one year is…

Q: Jim likes to day-trade on the Internet. On a good day, he averages a $1400 gain. On a bad day, he…

A: On a good day, Jim averages a $1400 gain. On a bad day, Jim averages a $700 loss.Percentage of time…

Q: An insurance company charges $1,142 per year to insure your car. They calculate that there is a 8%…

A: Expected value: The expected value of a random variable is the sum of the possible values that the…

Q: A lottery has a grand prize of $260,000, three runner-up prizes of $32,500 each, eight third-place…

A: Define the Random Variable, X : winning prize So, PMF of X is given by, P(X=x) = 1/1300000 if x =…

Q: Suppose a life insurance company sells a $210,000 one-year term life insurance policy to a…

Q: According to the tables used by insurance companies, a 39-year old woman has a 0.163% chance of…

Q: Suppose the probability of a IRS audit is 2.1% for U.S. taxpayers who file form 1040 and who earned…

Q: Suppose that the weight of a particular hand weight is advertised to be 5 pounds, but it can…

A: Answer Given minimum value =4.8 Maximum value =5.3 i.e; a=4.8 b =5.3 X~U [a, b] X~U [4.8,5.3] U…

Q: An insurance company charges $983 per year to insure your car. They calculate that there is a 4%…

A: The insurance company charges $983 per year. The chance of getting accident each year is 4%. Hence…

Q: One thousand lottery tickets are sold at $2 each. A single ticket is drawn, and the winner receives…

A: From the given information, Consider, X be the random variable that denotes the gain . Total number…

Q: On average, 40 jobs arrive per day at a factory. The time between arrivals of jobs is exponentially…

A: On average 40 jobs arrive at a factory.The factory can process an average of 42 jobs per day.The…

Q: uppose you pay $0.30 to roll a fair 8-sided die with the understanding that you will get $0.70 back…

A: Given data, 8-sided die is rolled P(1,2,3,4,5)=58P(6,7,8,)=38If we roll 1,2,3,4,5 we get $0.70If we…

Q: Illustration 72. A certain nurshing home usually admits 50 patients per day. On the average,…

Q: The lifetime of a phone costing 3450$ is exponentially distributed with a mean of 2 years. The…

Q: According to the National Center for Health Statistics, the life expectancy for a 50-year-old…

A: Let X be the survival of American females follows an exponential mean=32.5 years X~exp(1/32.5)

Q: Suppose a life insurance company sells a $160,000 one-year term life insurance policy to a…

Q: Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000 term…

A: b) From the given probability distribution table, it can be observed that the probabilities that…

Q: Jim is a 60-year-old Anglo male in reasonably good health. He wants to take out a $50,000 term…

A: (a) Consider the information in which a 60-year-old person who wants to take out $50,000 term life…

Q: There is 0.99986 probability that a randomly selected 30-year-old male lives through the year. A…

Q: Vanessa is interested in purchasing the local coffee shop in a small town in Central California.…

Q: Suppose a life insurance company sells a $260,000 one-year term life insurance policy to a…

A: Given data: The amount which is required to purchase the policy = $200. The probability that the…

Q: life insurance policy pays $140000 if a customer passes away during the year. At the start of each…

A: Given Insured amount, I=$140000 Insurance charge C=290

Q: Based on historical data, an insurance company estimates that a particular customer has a 1.2%…

Q: Suppose a life insurance company sells a $240,000 one-year term life insurance policy to a…

A: Given, Insurance type : one-year term life insurance Benefit : $240,000 Premium : $310 The…

Q: (a) Compute the probability that a randomly selected person does not have a birthday on March 13.…

A: here not consider leap year so total number of days in year is 365

Q: A health insurance company that provides insurance against death has a previous year's reserve of…

A: Given: Previous year's reserve: $2,000 Number of insured people: 100 Premium per person: $100…

Q: Suppose a life insurance company sells a $220,000 one-year term life insurance policy to a…

A: Cost incurred by company if died = -220000+260 = -219740 Cost received by company if not died= 260…

Q: Suppose that the life-time of a certain printer follows an exponential distribution with mean 2…

A: From the given information we find the solution.

Question

**Problem #4 – Life Insurance**

A life insurance company sells a $250,000 1-year term life insurance policy to a 20-year-old for $200. According to the National Vital Statistics Report, the probability that a 20-year-old survives the year is 0.999544. Compute the expected value for this policy.

Expert Solution

Step 1

Given Information:

A life insurance company sells $250,000 1-year term life insurance policy to a 20-year-old for $200.

Probability that a 20-year-old survives the year is 0.999544

Required: To compute the expected value for this policy.

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

An insurance company has written 50 policies for $125,000, 100 policies for $30,000, and 250 policies for $10,000 for people of age 20. If experience shows that the probability that a person will die at age 20 is 0.0012, how much can the company expect to pay out during the year the policies were written?
Previous Problem Problem List Next Problem point Sam is applying for a single year life insurance policy worth $62,850.00. If the actuarial tables determine that she will survive the next year with probability 0.998, what is her expected value for the life insurance policy if the premium is $417.00? Give your answer to the nearest penny. (Note: Include dollar signs in your answer. If your answer is negative, answer as -$123.45)
Based on historical data, an insurance company estimates that a particular customer has a 1.4% likelihood of having an accident in the next year, with the average insurance payout being $1500. If the company charges this customer an annual premium of $50, what is the company's expected value of this insurance policy?
Suppose a life insurance company sells a $270,000 one-year term life insurance policy to a 22-year-old female for $230. The probability that the female survives the year is 0.999552. Compute and interpret the expected value of this policy to the insurance company. The expected value is $. (Round to two decimal places as needed.)
Five hundred raffle tickets are sold for $1 each, for a first prize of $200 and two second prizes of $50 each. What is the expected value if you purchase one ticket?
Suppose you buy 1 ticket for $1 out of a lottery of 400 tickets with only 1 being the winning ticket. The prize for the one winning ticket is $100. What is your expected value in dollar? Round your value to 0.01 dollar. For example, -0.50 means losing half a dollar.
The probability that a 22-year-old female in the U.S. will die within one year is approximately 0.00044. If an insurance company sells a one-year, $20,000 life insurance policy to such a person for $295, what is the company's expectation? (Round your answer to the nearest dollar.)$