E STATISTICS AND PROBABILITY (ECON) Insert Design Layout References Mailings Review View ©' A

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‘ When calculating premiums on life insurance products insurance companies oﬁen

use life tables which enable the probability of a person dying in any age interval to be calculated. The following table gives the number out of 100,000 females who are still alive

during each ﬁve-year period of life between the age of 20 to 60 (inclusive): Out of 100,000 females born Exact age m Number alive at exact age

20 99,150

25 98,983

30 90,781

35 98,545

40 98,182

45 97,628

50 96,831

55 95,585

60 93,713 Suppose a W female on her 30th birthday purchases a one million dollar,

ﬁve-year term life policy from an insurance company. That is, the insurance

company must pay her estate $1 million if she dies within the next ﬁve years. (a) Determine the insurance company’s expected payout on this policy (b) What would be the minimum you would expect the insurance company to

charge her for this policy? Give a brief explanation of your answer (c) What would the expected payout be if the same policy were taken out by a

female on her 40th birthday? _‘/—+ 95% Page1of1 185Words D;< English (US)