A Company That Sells Annuities Must Base the Annual Payout

question 81

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.Find the age at which payments have ceased for approximately 86% of the plan participants.

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Definitions:

Objective Standards

Universal benchmarks or criteria that are not influenced by personal feelings, interpretations, or prejudice.

Manipulating Others

The act of skillfully influencing or controlling others to one's advantage, often in an unfair or deceitful way.

Organizational Politics

Refers to activities within a company that are aimed at improving someone's status or position and are typically at the expense of others.

Empowered Group

A team or group that has been given the authority, resources, and confidence to make decisions and take actions toward achieving defined objectives.