Question

A 20​-year-old woman wants to purchase a ​$100​,000 ​one-year life insurance policy. What should the insurance company charge the woman for the policy if it wants an expected profit of ​$50​?

Answer 1

Answer:

Hello some parts of the question is missing here is the missing part

Age          probability of female death

20              0.00060

30              0.00070

40              0.00095

50              0.00300

Answer : $110

Explanation:

Given that the woman is 20 years of age and wants to buy one-year life insurance policy the insurance company would have to charge her considering the probability of female death within 20 years of age

expected profit for insurance company = $50

cost of insurance = $100000

For the company to make a profit of $50 we make use of this relation

x * ( 1 - probability of female death at 20 ) - ( cost of insurance - x ) * probability of female death at 20  = 50

= x *( 1 - 0.00060 ) - ( 100000 - x ) * 0.00060 = 50

= x* ( 0.9994 ) - (60 - 0.00060 x ) = 50

= 0.9994 x - 60 + 0.00060 x = 50

hence x = 50 + 60 = $110