Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000 term (that is, straight death benefit) life insurance policy until she is 65. The policy will expire on her 65th birthday. The probability of death in a given year is provided by the Vital Statistics Section of the Statistical Abstract of the United States (116th Edition). x = age 60 61 62 63 64 P(death at this age) 0.00562
Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000 term (that is, straight death benefit) life insurance policy until she is 65. The policy will expire on her 65th birthday. The probability of death in a given year is provided by the Vital Statistics Section of the Statistical Abstract of the United States (116th Edition).
| x = age | 60 | 61 | 62 | 63 | 64 |
| P(death at this age) | 0.00562 | 0.00842 | 0.00950 | 0.01065 | 0.01165 |
Using this probability and the $50,000 death benefit, what is the expected cost to Big Rock Insurance?
(b) Repeat part (a) for ages 61, 62, 63, and 64.
| Age | Expected Cost |
| 61 | $ |
| 62 | $ |
| 63 | $ |
| 64 | $ |
What would be the total expected cost to Big Rock Insurance over the years 60 through 64?
If Big Rock Insurance wants to make a profit of $700 above the expected total cost paid out for Sara's death, how much should it charge for the policy?
If Big Rock Insurance Company charges $5000 for the policy, how much profit does the company expect to make?
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