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Math Help - Random Variables

  1. #1
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    Random Variables

    Suppose a life insurance company sells a $50,000, five-year term policy to a twenty-five-year old woman. at the beginning of each year the woman is alive, the company collects a premium of $P. the probability that the woman dies and the company pays the $50,000, is given in the below. So, for example, in Year 3, the company loses$50,000 - $ P with probability 0.00054 and gains $P with probability 1- 0.00054 = 0.99946. If the company expects to make $1000 on this policy, what should P be?


    --------------------------------------
    Year Probability
    --------------------------------------
    1 0.00051
    2 0.00052
    3 0.00054
    4 0.00056
    5 0.00059
    --------------------------------------
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  2. #2
    MHF Contributor
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    Re: Random Variables

    compute...
    [A]over the full 5 years, what is the expected premium income in terms of P?
    [B] over the full 5 years, what is the expected death payment?

    Find the value of p that makes [A]-[B] = 1000.
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