AM2.456 - Life Annuities A life annuity is a financial...

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Unformatted text preview: Life Annuities A life annuity is a financial product that provides a set of payments, usually equal, made at equal intervals of time, where each payment is contingent upon a person’s survival to the time of payment annuities certain – based on interest only life annuities – based on interest and survivorship Whole Life Annuities (section 2.4) (I) Immediate Whole Life Annuity An immediate whole life annuity is an annuity that is issued to ( x ), which provides payments of $1 at the end of every year that ( x ) is alive; when ( x ) dies, the payments stop The actuarial symbol is: a x = apv of future benefits Notes 1. If the annual annuity payment is $ R , then, NSP = R a x 2. The NSP represents how much it would cost an individual currently age x to purchase a whole life annuity 3. Calculating NSP’s using basic principles is long and tedious; there will be a shortcut table we can use (II) Whole Life Annuity Due A whole life annuity due is an annuity that is issued to ( x ), which provides payments of $1 at the beginning of every year that ( x ) is alive; when ( x ) dies, the payments stop The actuarial symbol is: ä x = apv of future benefits Note If the annual payment is $ R , then NSP = R ä x Relationship between ä and a ä x = a x + 1 Shortcut Table Table 2 provides values of ä x for x = 0, 1, 2,…, 98, 99. These values are based on the 2001 CSO and i = 4.5%. Example 2.4.1Example 2....
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This note was uploaded on 04/14/2010 for the course ACSCI 2053 taught by Professor Kopp during the Spring '09 term at UWO.

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AM2.456 - Life Annuities A life annuity is a financial...

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