that will pay $100,000 to the estate of anyone who dies in the next year.

a.

If the insurance company were selling life insurance separately to each group, what would be the

actuarially fair premium for each group?

b.

If an insurance company were offering life insurance to the entire group, but could not find out about

family cancer histories, what would be the actuarially fair premium for the group as a whole?

c. What will happen to the insurance company if it tries to charge the actuarially fair premium to the

group as a whole rather than to each group separately?
406 16 • Problems

Access for free at openstax.org
Financial Markets

17

FIGURE 17.1 Building Home Equity Many people choose to purchase their home rather than rent. This chapter

explores how the global financial crisis has influenced home ownership. (Credit: “red sold sign” by Diana Parkhouse/

Flickr Creative Commons, CC BY 2.0)

CHAPTER OBJECTIVES

In this chapter, you will learn about:
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