Retal im is a 60-year-old Anglo male in reasonably good health. He wants to take

Question

Retal im is a 60-year-old Anglo male in reasonably good health. He wants to take out a $50,000 term (that is, straight death on his 65th birthday. The probability of death in a given year is provided by the Vital Statistics Section of the benefit) life insurance policy until he is 65. The policy will expire im is applying to Big Rock Insurance Company for his term insurance policy 60 Statistical Abstract of the United States (116th Edition). ) What is the probability that Jim will die in his 60th year? (Enter your answer to five decimal places.) Using this probability and the $50,000 death benefit, what is the expected cost to Big Rock Insurance? (Round your answer to two decimal places.) .0013 ] (b) Repeat part (a) for years 61, 62, 63, and 64. (Round your answers to two decimal places.) Year Expected Cost 61 62 $ 63 s 64 $ What would be the total expected cost to Big Rock Insurance over the years 60 through 64? (Round your answer to two decimal places.) (c) If Big Rock insurance wants to make a profit of $700 above the expected total cost paid out for im's death, how much should it charge for the policy? (Round your answer to two decimal places.) og

Explanation / Answer

A)probability that Jim will die in his 60th year = 0.01087

Expected cost = 0.01087(50000)=$543.5

B)

Total expected cost =$3720.5

C)it should charge 3720.5+700=$4420.5

D)company is expected to make 5000-3720.5=$1279.5 profit

Year expected cost 61 0.01402(50000)=701 62 0.01720(50000)=860 63 0.02044(50000)=1022 64 0.02275(50000)=1137.5 Total 3720.5

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