What would be the actuarially fair premium for each group

Assignment Help Econometrics

Reference no: EM131107562

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 family history of cancer, and these men have one chance in 50 of dying in the next year, while the other 80% of men have one chance in 200 of dying in the next year. The insurance company is selling a policy that will pay $100,000 to the estate of anyone who dies in the next year.

a. If the insurance company were selling life insurance separately to each group, what would be the actuarially fair premium for each group?

b. If an insurance company were offering life insurance to the entire group, but could not find out about family cancer histories, what would be the actuarially fair premium for the group as a whole? c. What will happen to the insurance company if it tries to charge the actuarially fair premium to the group as a whole rather than to each group separately?

Reference no: EM131107562

Questions Cloud

Income gets re-distributed through income taxes-sales taxes : Do you think we should have perfect income distribution in this country and why do you feel the way you do? Currently, income gets re-distributed through income taxes, sales taxes, estate taxes, and things like that. If you don't think we should have..

How has this impacted our current culture : Invitation to Dance Contains unread posts Actions for Invitation to Dance There is a new film on disability and the arts, the trailer for which is here: What cultural and/or individual prejudices have prevented more people with disabilities from part..

Calculate the total overhead assigned to each product : Tristar Manufacturing produces two types of battery-operated toy soldiers: infantry and special forces. The soldiers are produced by using one continuous process. Four activities have been

Describe the normal function of these three systems : Analyze actions people can take to reduce their risk of developing the chronic disease or disorder. Briefly explain how these actions would impact the environment.

What would be the actuarially fair premium for each group : If an insurance company were offering life insurance to the entire group, but could not find out about family cancer histories, what would be the actuarially fair premium for the group as a whole? c. What will happen to the insurance company if it..

Evaluate return on equity for the company : Evaluate Return on Equity for the company for the last three years using the DuPont analysis. Compare the company's results to a major competitor.

Ashbrook company adopted the dollar-value lifo method : Ashbrook Company adopted the dollar-value LIFO method on January 1, 2014 (using internal price indexes and multiple pools). The following data are available for inventory pool A for the 2 years following adoption of LIFO.

Analysis of leadership traits styles and behavior : This assessment requires students to create their own leadership portfolio and action plan. Through discussion and analysis of leadership traits, styles and behavior, students will have an opportunity to reflect upon their own leadership capabilit..

Implementing corporate strategies for business : Suppose you are a senior manager, you are implementing corporate strategies for business

User Account

All Pages