Solve the problem. Round your answer to 2 decimal places when necessary.
-The overall U.S. death rate for 60 year-olds is approximately 12 deaths per 1000 people. Suppose that a life insurance company insures 2000 60-year-old people. The cost of the premium is $760 per
Year, and the death benefit is $60,000. What is the expected profit or loss for the insurance
Company?

Question

Quizplus · Accepted Answer

The expected number of deaths is 12 deaths per 1000 people, so for 2000 people, it would be 24 deaths (12 * 2). The total death benefit paid out would be 24 deaths * $60,000 = $1,440,000. The total premium collected would be 2000 people * $760 = $1,520,000. The expected profit is the total premium collected minus the total death benefit paid out, which is $1,520,000 - $1,440,000 = $80,000.

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