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    Probability and Expected Loss

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    X=age(years) 60 61 62 63 64
    p(death at this age 0.00756 0.00825 0.00896 0.00965 0.01035

    a) What is the probability that sara will die in her 60th year? using this probability and the $50,000 death benefits, what is the expected loss?
    b) Repeat part(a) for years 61,62,63, and 64. What would be the total expected loss over the years 60 through 64?
    c) If the insurance wants to make a profit of $700 above the expected total loss paid out for Sara death, how much should it charge for the policy?
    d) If the insurance company charges $5,000how much profit does the company expect to make?

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    Solution Summary

    This solution shows step-by-step calculations in an Excel file to determine the probability that Sara will die on her 60th birthday as well as the charge for policy, profit the company makes and total expected loss.