P.91 Life Insurance A non-profit organization plans to offer a life insurance service. Participants agree to a five-year

[answerhappygod]

P 91 Life Insurance A Non Profit Organization Plans To Offer A Life Insurance Service Participants Agree To A Five Year 1 (524.89 KiB) Viewed 28 times

P.91 Life Insurance A non-profit organization plans to offer a life insurance service. Participants agree to a five-year contract in which they pay the organiza- tion a yearly fee. The fee does not change over the course of the contract. If the policy holder dies dur- ing the five-year period, the organization will pay $100,000 to her family and there will be no more yearly fee. The probabilities of death at ages 60, 61, 62, 63, and 64 for a US woman on her 60th birthday are given in Table P.15.16 For example, on her 60th birthday a woman will have a 0.76% chance of dying at the age of 62. (a) Let X be the organization's total profit, in dol- lars, five years after selling a contract to a woman on her 60th birthday. Write the probability dis- tribution of X, where the values of X are given in terms of the yearly fee c. (b) Write the mean of X in terms of c. (c) What yearly fee should the organization charge 60-year-old women if they hope to break even? (The organization can expect to break even if they have a mean profit of $0.) Table P.15 Probabilities of death for a US woman on her 60th birthday Age 60 61 62 63 64 Probability 0.00648 0.00700 0.00760 0.00829 0.00908