Question: Expected Value: Life Insurance Sara is a 60-year-old Anglo female in tea good health. She wants to take out a $50,000 term (that is, straight death life insurance policy until she is 65. The policy will expire on her 65th b. The probability of death in a given year is provided by the Vital Statistics of the Statistical Abstract of the United States (116th Edition).

Sara is applying to Big Rock Insurance Company for her term insurance policy

a.) What is the probability that Sara will die in her 60^th year? Using this probability and the $50,000 death benefit, what is the expected loss to Big Rock Insurance?

b.) Repeat part (a) for years 61, 62, 63, and 64. What would the total expected loss to Big Rock Insurance over the years 60 through 64?

c.) If Big Rock Insurance wants to make a profit of $700 above the expected total of loss paid out for Sara’s death, how much should it charge for the policy?

d.) If Big Rock Insurance Company charges $5,000 for the policy, how much profit does the company expect to make?