Question: Life insurance A life insurance company sells a term insurance policy to a 21-year-old male that pays $100,000 if the insured dies within the next 5 years. The probability that a randomly chosen male will die each year can be found in mortality tables. The company collects a premium of $250 each year as payment for the insurance. The amount Y that the company earns on this policy is $250 per year, less the $100,000 that it must pay if the insured dies. Here is a partially completed table that shows information about risk of mortality and the values of Y = profit earned by the company:
(a) Explain why the company suffers a loss of $98,750 on such a policy if a client dies at age 25.
(b) Find the missing probability. Show your work.
(c) Calculate the mean mY. Interpret this value in context.