Age at death 25 0.00057 0.00060 Probability 0.00039 0.00044 0.00051 (a) What is

Question

Age at death 25 0.00057 0.00060 Probability 0.00039 0.00044 0.00051 (a) What is the probability that the man does not die in the next five years? (b) An online insurance site offers a term insurance policy that will pay $100,000 if a 25-year-old man dies within the next five years. The cost is $175 per year. So the insurance company will take in $875 from this policy if the man does not die within five years. If he does die, the company must pay $100,000. Its loss depends on how many premiums the man paid, as follows: Age at death 25 $99,825 $99,650 $99,475 $99,300 $99, Loss what is the insurance company's mean cash intake from such polices? 4.94 Risk for one versus thousands of life insu

Explanation / Answer

a)P(Doesn not die)=(1-0.00039)*(1-0.00044)*(1-0.00051)*(1-0.0006)=0.997493

b)Mean Input=175*0.99961+350*0.99961*0.99956+525*0.99961*0.99956*0.99949+ 700*0.99961*0.99956*0.99949*0.99943+875*0.99961*0.99956*0.99949*0.99943*0.9994-100000*(0.00039)-100000*0.99961*0.00044-100000*0.99961*0.99956*0.00051-100000*0.99961*0.99956*0.99949*0.00057-100000*0.99961*0.99956*0.99949*0.99943*0.0006=2620-250=2370

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