The probability that a 30-year old white male will live another year is .99842. What premium would an company charge to break even on a 1-year million dollar term policy?
someone please help me im not sure how to solve this problem

 

  • stanschim 8:14 pm on August 13, 2010

    The probability that a 30-year old white male will die within a year is 1 – 0.99842 = 0.00158

    The expected value of the payout would be $1,000,000 x (0.00158) = $1580.

    So, to break even, the company would need to charge $1580.

  • Jeff Aaron 8:14 pm on August 13, 2010

    Probability of 30-year old white male dying within 1 year is 1 – .99842 = 0.00158
    So the expected payout of that policy is 0.00158 * $1,000,000 = $1,580.00
    So the premium should be $1,580.00 to break even (or even more if they want to make a profit).