Kibiie L.

asked • 24d

Term life insurance & death probability

A man wishes to purchase a 5-year term-life insurance policy that will pay the beneficiary $25,000 in the event that the man's death occurs during the next 5 years. Using life insurance tables, he determines that the probability that he will live another 5 years is 0.96. What is the minimum amount that he can expect to pay for his premium? Hint: The minimum premium occurs when the insurance company's expected profit is zero.

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