The company will have a profit of $ 135,000,000 per year.
Given,
The number of people insures in a given year by the company = 900,000
The cost of the premium = $500 per year
The death benefit = $50,000
Death rate = 7 per 1000 people
We have to find the expected profit or loss for the insurance company;
Here,
Total amount gained by company as premium = 900,000 x 500 = $450,000,000 per year
Number of deaths as per the rate given = 7 for 1000
900,000/1000 = 900
900 x 7 = 6300 deaths
Total amount spend for death benefit = 6300 x 50,000 = $315,000,000
Now,
Total premium amount - Death benefit = Profit/loss amount
450,000,000 - 315,000,000 = 135,000,000
That is,
The company will have a profit of $ 135,000,000 per year.
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