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Two actuaries, A and B, agree that the probability that a female age 60 will die within 10 years is 0.36.
(a) Actuary A decides that the force of mortality for male lives is 1.5 times the force of mortality for females lives, at all ages over 60. What is the probability that a male age 60 will die within 10 years, under A's assumption?
(b) Actuary B disagrees and decides that the force of mortality for males lives is obtained by adding a constant of 0.01 to the force of mortality for female lives, at all ages over 60. What is the probability that a male age 60 will die within 10 years under B's assumption?
Give a complete solution in the form of a pair of decisions under given circumstances that maximize the designer's expected pro?ts.
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