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Explain carefully why selling insurance is not risky for

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Reference no: EM13576357

Question: It would be quite risky for you to insure the life of a 21-year-old friend under the terms of above question. There is a high probability that your friend would live and you would gain $1,250 in premiums. But if he were to die, you would lose almost $100,000. Explain carefully why selling insurance is not risky for an insurance company that insure many thousands of 21-year-old men?

Age of Death

 

21

22

23

24

25

>26

 

Earnings X
Probability

($99,750)

($99,550)

($99,250)

($99,000)

($98,750)

$1,250

 

0.00183

0.00186

0.00189

0.00191

0.00193

?

 

Reference no: EM13576357

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