Indian Institute of Foreign Trade 2010 Solved Paper

Question : 4 of 135

Marks: +1, -0

Sun Life Insurance Company issues standard,preferred, and ultra-preferred policies. Among the company’s policy holders of a certain age,50% are standard with a probability of 0.01 of dying in the next year, 30% are preferred with a probability 0.008 of dying in the next year, and 20% are ultra-preferred with a probability of 0.007 of dying in the next year. If a policy holder of that age dies in the next year, what is the probability of the deceased being a preferred policy holder?

0.1591
0.2727
0.375
None of the above

Validate

Solution:

If there are 10000 policy holders then 5000 are of standard, 3000 are of preferred and 2000 are of ultra-preferred
0.01 of standard policy holders may die next year i.e. 50 of standard policy holder may die next year
0.008 of preferred policy holders may die next year i.e. 24 of preferred policy holders may die next year
0.007 of ultra-preferred policy holders may die next year i.e. 14 of ultra-preferred policy holders may die next year
Total number of people that may die next year

=50+24+14=88

Probability that the person died is a preferred policy holder is

24/88=0.2727

Therefore our answer is option 'B'

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