# Jim is a 60-year-old Anglo mal

Jim is a 60-year-old Anglo male in reasonably good health. He wants to take out a \$50,000 term (i.e., straight death benefit) life insurance policy until he is 65. The policy will expire on his 65th birthday. The probability of death in a given year is provided.

 x = age P(death at this age) 60 61 62 63 64 0.01012 0.01423 0.01711 0.02071 0.02209

Jim is applying to Big Rock Insurance Company for his term insurance policy.

#### (a)

What is the probability that Jim will die in his 60th year? (Enter a number. Enter your answer to five decimal places.)

Using this probability and the \$50,000 death benefit, what is the expected cost to Big Rock Insurance (in dollars)? (Enter a number. Round your answer to two decimal places.)

#### (b)

What is the expected cost to Big Rock Insurance for years 61, 62, 63, and 64 (in dollars)? (For each answer, enter a number. Round your answers to two decimal places.)
year 61 \$
year 62 \$
year 63 \$
year 64 \$

What would be the total expected cost to Big Rock Insurance over the years 60 through 64 (in dollars)? (Enter a number. Round your answer to two decimal places.)

#### (c)

If Big Rock Insurance wants to make a profit of \$700 above the expected total cost paid out for Jim’s death, how much should it charge for the policy (in dollars)? (Enter a number. Round your answer to two decimal places.)

#### (d)

If Big Rock Insurance Company charges \$5000 for the policy, how much profit does the company expect to make (in dollars)? (Enter a number. Round your answer to two decimal places.)

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