Question: Life Insurance:
A life insurance company sells a term insurance policy to a 21-year-old male that pays $100,000 if that 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 X that the company earns on this policy is $250 per year., less the $100,000 that it must pay if the insured dies. The distribution of X is shown below. Fill in the missing probability in the table and calculate the mean earnings mx.
Age at Death (years):
|
Age of Death
|
|
|
21
|
22
|
23
|
24
|
25
|
>26
|
|
|
Earnings X
Probability
|
($99,750)
|
($99,550)
|
($99,250)
|
($99,000)
|
($98,750)
|
$1,250
|
|
|
0.00183
|
0.00186
|
0.00189
|
0.00191
|
0.00193
|
?
|
|