Question: An insurance company estimates that the probability that an individual in a particular risk group will survive one year is 0.99. Such a person wishes to buy a $75,000 one-year term life insurance policy. Let C denote how much the insurance company charges such a person for such a policy.
a. Construct the probability distribution of X. (Two entries in the table will contain C.)
b. Compute the expected value E (X) of X.
c. Determine the value C must have in order for the company to break even on all such policies (that is, to average a net gain of zero per policy on such policies).
d. Determine the value C must have in order for the company to average a net gain of $150 per policy on all such policies.