ACT348F  TERM TEST 1  OCTOBER 18, 2003
Print your name and student number clearly on each page
Do all work on this question paper, with work for question 1 on this page (use both sides if
necessary), work for question 2 on the next page, etc.
All calculations should be done to at least 6
digit accuracy
.
Answers are expected to have at least 4 digit accuracy.
THIS IS A CLOSED BOOK TEST  NO BOOKS OR NOTES ARE ALLOWED.
A calculator may be used
1.
A 4year fully discrete term insurance with face amount 1000 is issued at age
B
(premiums are scheduled for the lifetime of the policy).
The effective annual interest rate
is
25%, and the mortality probabilities are
3œ
; œ Þ#! ß ;
œ Þ#& ß ;
œ Þ%! ß ;
œ Þ&!
B
B"
B#
B$
.
The equivalence principle annual premium is
.
"!!!T
œ #"*Þ%&
BÀ%l
"
3
(a)
Formulate the 2nd year terminal prospective loss random variable (conditional
distribution).
2
(b)
Find the 2nd year terminal benefit reserve as the expected value of the loss random
variable in part (a).
4
(c)
Write the prospective form of the 2nd year terminal benefit reserve
,
"!!! Z
#
BÀ%l
"
and calculate it by calculating each of the factors in the expression (the premium is given
above).
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '04
 Broverman
 Term life insurance, Whole life insurance, Equivalence Principle, ÞÞ ÞÞ

Click to edit the document details