What would be actuarially fair premium for each group

Assignment Help Business Economics

Reference no: EM131108710

Imagine that 50-year-old men can be divided into two groups: those who have a family history of cancer and those who do not. For the purposes of this example, say that 20% of a group of 1,000 men have a familyhistory of cancer, and these men have one chance in 50 ofdying in the next year, while the other 80% of men haveone chance in 200 of dying in the next year. The insurance company is selling a policy that will pay $100,000 to theestate of anyone who dies in the next year.

a) If the insurance company were selling life insurance separately to each group, what wouldbe the actuarially fair premium for each group?

b) If an insurance company were offering life insurance to the entire group, but could not findout about family cancer histories, what would be the actuarially fair premium for the group asa whole?

c) What will happen to the insurance company ifit tries to charge the actuarially fair premium tothe group as a whole rather than to each group separately?

Reference no: EM131108710

Questions Cloud

Program to setup the dma channel : Write a C program to setup the DMA channel 2 for write cycle in Block transfer mode and auto initialization should be off. Suppose that you have to transfer 96 bytes.

Difference between the strategic npv and the traditional npv : What is the difference between the strategic NPV and the traditional NPV? Do they always result in the same accept–reject decisions?

Climate regarding organizational behavior : I have a new assignement and was wondering if you could please look it over and let me know if you are willing to write it. It is due Wednesday by 5:30pm (CST).

How to avoid making this mistake in future practice : Write a few sentences explaining how to avoid making this mistake in future practice - Identify the error made in the solved problem.

What would be actuarially fair premium for each group : Imagine that 50-year-old men can be divided into two groups: those who have a family history of cancer and those who do not. For the purposes of this example, say that 20% of a group of 1,000 men have a familyhistory of cancer, If the insurance compa..

What are real options what are some major types of real opt : What are real options? What are some major types of real options?

Explain why a mere comparison of the npvs of unequal lived : Explain why a mere comparison of the NPVs of unequal-lived, ongoing, mutually exclusive projects is inappropriate. Describe the annualized net present value (ANPV) approach for comparing unequal-lived, mutually exclusive projects.

What entry for income taxes should be recorded in 2011 : How should the income tax expense section of the income statement for 2011 appear?

Communicate clearly and effectively in a business : As part of your final deliverable, you will prepare and record a short presentation of your capstone project using Adobe Connect. For this discussion, complete the following:

User Account

All Pages