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Life Insurance Policy Payout Probability

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The probability that Traci Muldone will die during the 10-year term of a life insurance policy is assessed by the insurance company at 1/5. Arthur Average's probability of living to the end of the 10-year period is reckoned at 95% What is the probability that at the end of the 10 years (a) both (b) one or the other, but not both is living?

Probability (Muldone dying) = 0.2 (given)
Probability (Average dying) = 1 - 0.95 (given)

Probability (both living) = 0.8 x 0.95 = 0.76 or 76%

i.e. Probability Muldone AND Average living = 76%

So what do we think is the probability of either one or the other (but NOT both) living?

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This solution provides a detailed, step by step explanation of the given question regarding the payout probability of a ten year life insurance policy.

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The probability that Traci Muldone will die during the 10-year term of a life insurance policy is assessed by the insurance company at 1/5. Arthur ...

Solution provided by:
Changping Wang, MA
Education
  • BSc , Wuhan Univ. China
  • MA, Shandong Univ.
Recent Feedback
  • "Your solution, looks excellent. I recognize things from previous chapters. I have seen the standard deviation formula you used to get 5.154. I do understand the Central Limit Theorem needs the sample size (n) to be greater than 30, we have 100. I do understand the sample mean(s) of the population will follow a normal distribution, and that CLT states the sample mean of population is the population (mean), we have 143.74. But when and WHY do we use the standard deviation formula where you got 5.154. WHEN & Why use standard deviation of the sample mean. I don't understand, why don't we simply use the "100" I understand that standard deviation is the square root of variance. I do understand that the variance is the square of the differences of each sample data value minus the mean. But somehow, why not use 100, why use standard deviation of sample mean? Please help explain."
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  • "Thank you so much for all of your help!!! I will be posting another assignment. Please let me know (once posted), if the credits I'm offering is enough or you ! Thanks again!"
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