Question

Avicenna, a major inurance company, offer five-year life inurance policie to 65-year-old. If the holder of one of thee policie die before the age of 70, the company mut pay out $23,900 to the beneficiary of the policy. Executive at Avicenna are conidering offering thee policie for $956 each. Suppoe that for each holder of a policy there i a 4% chance that they will die before the age of 70 and a 96% chance they will live to the age of 70

Answer 1

Explanation:

E(x) = 791*0.97 - 23600*0.03 = 59.27. The answer is positive so they will make a profit of $59.27 for each policy sold.

However the correct answer is $83. By trial and error.