Final answer:
The question on determination of the annual premium for an endowment insurance policy cannot be definitively answered without additional information on the insurer's rates, Adam's risk factors, and other criteria used in calculating insurance premiums.
Step-by-step explanation:
The question given is related to finding the annual premium for an endowment insurance policy, which is quintessentially a mixture of life insurance and saving plan. The policy covers Adam Smith for a period of twenty years and has a face value of $25,000. Unfortunately, the information provided does not include all the necessary details to determine the correct annual premium, such as the insurance company's rates, Adam's health, lifestyle, and other risk factors that insurers typically evaluate. Insurance premiums are calculated based on actuarial science, which assesses the risk of insuring a person based on various factors and statistics.
Consider a scenario we are given as an example: segregating a group of 50-year-old men into those with and without a family history of cancer impacts the calculation of an actuarially fair premium. If an insurance company cannot distinguish between the risk categories, it may lead to adverse selection, where those with higher risks are more likely to purchase insurance, subsequently leading to higher than expected claim payouts for the insurer.
This scenario underscores the complexity of determining insurance premiums. Given that we lack the methodology used by Adam Smith's insurer to compute his exact premium, we cannot definitively select one of the provided options as his annual premium.