Which of the following best represents the annual insurance premium that a company might charge for $100,000 of life insurance on a man with a 1 in 100 chance of dying in the year. Assume the insurance company wants to make a 20% margin on the policy?

$1200

Step-by-step explanation:

Amount that the policy will cover under life insurance = $100,000

Chance of dying of any man in a year = 1 in a 100

                                                              = (1/100) X 100 %

                                                              = 1%

So the annual insurance premium that the company should charge = 1% of the policy amount + 20 % margin on annual premium  = 1% of 100,000 + 20 % of (1% of 100,000 )  = 1,000 + 20% of 1,000 = 1,000 + 200 = 1200

Therefore the Company should charge $1200 for the insurance policy so as to make a 20% margin on the policy.

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