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:

Body Disposition

The method of handling a dead body following death, such as burial, cremation, or donation for medical research.

Eternal Life

A concept often associated with religious or philosophical beliefs, referring to the idea of living forever or having an existence beyond death.

Preferable

Described as more desirable or suitable than other alternatives.

Existentialist Perspective

A philosophical approach focusing on individual freedom, choice, and subjective experience, emphasizing the creation of personal meaning in an indifferent universe.