A Company That Sells Annuities Must Base the Annual Payout

question 155

Short Answer

A company that sells annuities must base the annual payout on the probability distribution of the length of life of the participants in the plan.Suppose the probability distribution of the lifetimes of the participants is approximately a normal distribution with a mean of 68 years and a standard deviation of 3.5 years.What proportion of the plan recipients die before they reach the standard retirement age of 65?

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Definitions:

Urine Test

A diagnostic analysis of urine by chemical, physical, or microscopic means to test for the presence of disease, drugs, or other substances.

Glucose Tolerance Test

A medical test measuring the body's ability to metabolize glucose and thus diagnose diabetes or prediabetes.

Blood Sugar Levels

The level of glucose found in the bloodstream, crucial for the diagnosis and treatment of diabetes.

Processes Sugar

The biological mechanism by which living organisms break down sugar (glucose) molecules to produce energy for cellular activities.