There are six problems in this assignment which you should submit solutions, of

Question

There are six problems in this assignment which you should submit solutions, of which three are some the book, and another three are not form the book. At the end of this document is a list of odd numbered textbook problems, which are recommended for practice but are to be submitted for grading, and whose answers you can look up in the back often book. There is one extra problem based on class work, and is work thinking about. Please clearly label al problems and In particular, some questions specifically call r explanations. These are From the book, 76 29A20year old female purchases a 1-year life insurance policy worth $250,000. The insurance company determines that she will survive the policy period with probability 0.9995. a. If the premium for the policy is $300 what is the expected profit for the company?

Explanation / Answer

probabilty that female dies in policy period =1-probability she survives =1-0.09995 =0.0005

a)here we know that expected profit =expected profit -expected loss =premium paid -expected policy value if she died

=300 -(0.0005*250000) =175

b) from above let x be the value of premium at which we wil receive expected profit as 250/ policy.

hence from above 250 =x-(0.0005*250000)

x=250+125 =375

hence at $375 , company will make an expected profit of $250.

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