Suppose a life insurance company sells a $250,000 one-year term life insurance policy to a 24-year-old female for $360. The probability that the female survives the year is 0.999477. Compute and interpret the expected value of this policy to the insurance company. The expected value is S. (Round to two decimal places as needed.) Which of the following interpretation of the expected value is correct? O A. The insurance company expects to make an average profit of S32.71 on every 24-year-old female it insures for 1 month. O B. The insurance company expects to make an average profit of $359.81 on every 24-year-old female it insures for 1 year. O C. The insurance company expects to make an average profit of $20.84 on every 24-year-old female it insures for 1 month. O D. The insurance company expects to make an average profit of $229.25 on every 24-year-old female it insures for 1 year.

Suppose a life insurance company sells a $250,000 one-year term life insurance policy to a 24-year-old female for $360. The probability that the female survives the year is 0.999477. Compute and interpret the expected value of this policy to the insurance company. The expected value is S. (Round to two decimal places as needed.) Which of the following interpretation of the expected value is correct? O A. The insurance company expects to make an average profit of S32.71 on every 24-year-old female it insures for 1 month. O B. The insurance company expects to make an average profit of $359.81 on every 24-year-old female it insures for 1 year. O C. The insurance company expects to make an average profit of $20.84 on every 24-year-old female it insures for 1 month. O D. The insurance company expects to make an average profit of $229.25 on every 24-year-old female it insures for 1 year.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume that you have calculated: (a) premiums for life insurance policies and (b) payments to annuitants based upon an assumption that everybody dies before attaining age 101. Now you discover that a significant number of your policy owners are likely to live beyond age 101 and some will live to age 121. How will that affect your business?
An insurance agent just offered you a new insurance product that will provide you with $1,959.20 13 years from now if you invest $400 today. What annual rate of interest would you earn if you invested in this product?
Assume that at the beginning of the year, you purchase an investment for $2,500 that pays $67 annual income. Also assume that the investment's value has decreased to $2,350 at the end of the year. a. What is the rate of return for this investment? b. Is the rate of return a positive or a negative number? Complete this question by entering your answers in the tabs below. Req 1 Req 2 What is the rate of return for this investment? Note: Enter your answer as a percent rounded to 2 decimal places. Input the amount as a positive value. Rate of return % Req 1 Req 2 >
You are comparing two investments. The first pays 3 percent interest per month, compounded monthly, and the second pays 6 percent interest per six months, compounded every six months. a. What is the effective semiannual interest rate for each investment? b. What is the effective annual interest rate for each investment? c. Based on the interest rates, which investment is preferred? Does the decision depend on whether the comparison is based on an effective six-month rate or an effective one-year rate? a. The effective semiannual interest rate for the first investment is percent. (Type an integer or decimal rounded to two decimal places as needed.)
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For TVM calculator: Write each known variable’s value as it appears in the calculator and use a question mark for the missing variable. Then, in the space provided write the missing variable’s value, as it appears in the calculator. Finally, write your final answer in context, with units, as a complete sentence. Donald is looking to invest in an account earning an interest rate of 1.75% compounded weekly and make weekly payments. If he wants $21,000 in 10 years, what do his payments need to be? N=520 I= 1.75 PV=? PMT=? FV= 21,000 P/Y=52 C/Y=52 Missing Variable Value __________________ Context Sentence:
If you were given a choice of investing in an account that paid quarterly interest and one that paid monthly interest, which one should you choose if they both offer the same stated interest rate and why?
Using Table 19-1 and Table 19-2, calculate the annual, semiannual, quarterly, and monthly premiums (in $) for the life insurance policy. Round your answers to the nearest cent. Age 18 19 20 21 22 Face Value of Policy 23 24 25 26 27 28 29 30 TABLE 19-1 Annual Life Insurance Premiums (per $1,000 of Face Value) 35 40 $45,000 45 50 55 60 5-Year Term Male $2.32 2.38 243 2.49 2.55 2.62 32.69 2.77 2.84 2.90 2.98 3.07 3.14 Sex and Age of Insured 3.43 4.23 6.12 9.72 16.25 24.10 Term Insurance Female $ 1.90 1.96 2.07 2.15 2.22 2.30 2.37 2.45 2.51 2.58 male-50 2.64 2.70 2.78 2.92 3.90 5.18 8.73 12.82 19.43 10-Year Term 4.57 4.64 4.70 4.79 4.85 Male Female $4.33 $4.01 4.42 4.12 4.49 4.20 4.92 5.11 5.18 5.23 5.30 Type of Policy 6.42 7.14 8.81 14.19 22.03 37.70 20-payment life 4.29 4.36 4.42 4.47 4.51 4.60 4.69 4.77 4.84 4.93 5.35 6.24 7.40 9.11 13.17 24.82 Whole Life Male Female $11.17 $13.22 13.60 11.68 14.12 12.09 14.53 14.97 15.39 15.90 16.38 16.91 17.27 17.76 18.12 18.54 24.19 27.21 33.02 37.94…
An accounting firm agrees to purchase a computer for $180,000 (cash on delivery) and the delivery date is in 270 days. How much do the owners need to deposit in an account paying 0.85% compounded quarterly so that they will have $180,000 in 270 days? (a) State the type. sinking fund amortization present value future value ordinary annuity (b) Answer the question. (Round your answer to the nearest cent.) $
I need the answer as soon as possible
Future Value of an Annuity Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent. $600 per year for 10 years at 14%. $ $300 per year for 5 years at 7%. $ $600 per year for 5 years at 0%. $ Now rework parts a, b, and c…
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