Question

8.) From actuary tables, WIC determined that the likelihood that a man age 25 will die within a next year is 0.0002. If WIC sells 4,000 policies to 25 year old men this year, what is the probability that they will pay on exactly one policy?

Please show work using Excel.

Answer 1

expected number of payout on 4000 policies =4000*0.0002 = 0.8

therefore from Poisson approximation:

probability that they will pay on exactly one policy =poisson(1,0.8,false)=0.3595

(excel formula is given in bold , you can do it from binomial distribution too, for which formula is

=BINOMDIST(1,4000,0.0002,FALSE) =0.3595 )