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2. An insurance company writes a policy to the effect that an amount of money A...
2) [2096] Penguin auto insurance estimates that there exists a .23 probability that 16-year-old d...
2) [2096] Penguin auto insurance estimates that there exists a .23 probability that 16-year-old driving a red, two-door, 8-cylinder engine car will get into an accident that would cost the maximum amount in liability of $100,000. The annual premium for such a policy is $2,500. Q1) What is the expected profit per year for Penguin on such a policy? Q2) What profit must Penguin charge in order to make a profit on each policy? 3.120%) Recent research at Viking auto...
An insurance company issues a policy on a horse trailer under the following conditions: The replacement...
An insurance company issues a policy on a horse trailer under the following conditions: The replacement cost ($6,000) will be paid for a total loss. If it is not a total loss, but the damage is more than $3,000, then $2,700 will be paid. Nothing will be paid for damage costing $3,000 or less and of course nothing is paid out if there is no damage. The company estimates the probability of the first three events as 0.08, 0.19, and...
show all work Problem 5 An insurance company issues a policy on a car under the...
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Problem 5 An insurance company issues a policy on a car under the following conditions: (1) The replacement cost of $37,000 will be paid for a total loss. (ii) If it is not a total loss, but the damage is more than $11,000, then only $ 10,500 will be paid. (iii) Nothing will be paid for damage costing $11,000 or less and, (iv) Nothing will be paid out if there is no damage. The company estimates, based...
Every year, an insurance company sells a $500 policy to 100,000customers. In case of death, the...
Every year, an insurance company sells a $500 policy to 100,000customers. In case of death, the company must pay $200,000 to a relative. Assumingthat the each person dies every year with probabilityp= 0.001 independently of othersanswer the following questions: a. What is the probability that the company makes a profit on any givenyear? Use the relevant approximation. b. The company goes bankrupt if the first year with losses or no profit isfollowed by another year of losses or no profit....
A man wishes to purchase a life insurance policy that will pay the beneficiary $15,000 in...
A man wishes to purchase a life insurance policy that will pay the beneficiary $15,000 in the event that the man's death occurs during the next year. Using life insurance tables, he determines that the probability that he will live another year is 0.97. What is the minimum amount that he can expect to pay for his premium? Hint: The minimum premium occurs when the insurance company's expected profit is zero.
An insurance company wants to offer a policy where it pays out $50,000 for death and...
An insurance company wants to offer a policy where it pays out $50,000 for death and $20,000 for disability. It calculates a probability of .0001 that a policy holder will die and a probability of .0003 that a policy holder will become disabled during the course of a year. The company wants to have an expected profit of $25 per year per policyholder. What should the company charge for its annual premium?
An insurance company would like to offer theft insurance for renters. The policy would pay the...
An insurance company would like to offer theft insurance for renters. The policy would pay the full replacement value of any items that were stolen from the apartment. Some apartments have security alarms installed. Such systems detect a break-in and ring an alarm within the apartment. The insurance company estimates that the probability of a theft in a year is 0.05 if there is no security system and 0.01 if there is a security system (there cannot be more than...
(7) An actuary for an insurance company created the following probability table for a certain home...
(7) An actuary for an insurance company created the following probability table for a certain home insurance policy for a home in Drachtown, USA (which is a very depressing place). Event Payout to Policy Holder. Probability No claim $0 0.8855 Minor claim $4,500 0.0905 Medium claim $16,800 0.0142 Major Claim $70,500 0.0098 (a) Presuming years are independent, determine the probability that over the course of 12 years, the policy holder is paid some money at least once. Show calculation. (b)...
Question 8 (10 points) A term life insurance policy will pay a beneficiary a certain sum...
Question 8 (10 points) A term life insurance policy will pay a beneficiary a certain sum of money upon the death of the policy holder. These policies have premiums that must be paid annually. Suppose a life insurance company sells a $230,000 one year term life insurance policy to a 49-year-old female for $527. According to the National Vital Statistics Report, Vol. 47, No. 28, the probability the female will survive the year is 0.99791. Compute the expected value of...
Suppose a life insurance company sells a $150,000 one-year term life insurance policy to a 21-year-old...
Suppose a life insurance company sells a $150,000 one-year term life insurance policy to a 21-year-old female for $340. The probability that the female survives the year is 0.999561. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ . (Round to two decimal places as needed.) Which of the following interpretation of the expected value is correct? O A. The insurance company expects to make an average profit of $339.85 on...
2) [2096] Penguin auto insurance estimates that there exists a .23 probability that 16-year-old driving a red, two-door, 8-cylinder engine car will get into an accident that would cost the maximum amount in liability of $100,000. The annual premium for such a policy is $2,500. Q1) What is the expected profit per year for Penguin on such a policy? Q2) What profit must Penguin charge in order to make a profit on each policy? 3.120%) Recent research at Viking auto...
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Problem 5 An insurance company issues a policy on a car under the following conditions: (1) The replacement cost of $37,000 will be paid for a total loss. (ii) If it is not a total loss, but the damage is more than $11,000, then only $ 10,500 will be paid. (iii) Nothing will be paid for damage costing $11,000 or less and, (iv) Nothing will be paid out if there is no damage. The company estimates, based...
(7) An actuary for an insurance company created the following probability table for a certain home insurance policy for a home in Drachtown, USA (which is a very depressing place). Event Payout to Policy Holder. Probability No claim $0 0.8855 Minor claim $4,500 0.0905 Medium claim $16,800 0.0142 Major Claim $70,500 0.0098 (a) Presuming years are independent, determine the probability that over the course of 12 years, the policy holder is paid some money at least once. Show calculation. (b)...
Question 8 (10 points) A term life insurance policy will pay a beneficiary a certain sum of money upon the death of the policy holder. These policies have premiums that must be paid annually. Suppose a life insurance company sells a $230,000 one year term life insurance policy to a 49-year-old female for $527. According to the National Vital Statistics Report, Vol. 47, No. 28, the probability the female will survive the year is 0.99791. Compute the expected value of...
Suppose a life insurance company sells a $150,000 one-year term life insurance policy to a 21-year-old female for $340. The probability that the female survives the year is 0.999561. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ . (Round to two decimal places as needed.) Which of the following interpretation of the expected value is correct? O A. The insurance company expects to make an average profit of $339.85 on...
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