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math question...10 easy points for best answer?
As a fringe benefit, Dennis Taylor receives a $26,500 life insurance policy from his employer. The probability that Dennis will live another year is 0.9575. If he purchases the same coverage for himself, what is the minimum amount that he can expect to pay for the policy? (Round your answer to the nearest cent.)
1 Answer
- ChezcatLv 41 decade agoFavorite Answer
I have an actuarial degree and you can't really answer this question properly without more information about the life insurance policy and additional mortality rates. I'm assuming the question means it's a one year term insurance, if thats the case then
For an insurance company to break even they would be charging (1-0.9575)*26500 = $1126.25
So he should expect to pay that at the very least.
Also note that the 0.9575 rate is really low and Dennis must be around the age of 74 or 75, he should have retired by now.
