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# 2010 - MA820/10 UNIVERSITY OF KENT FACULTY OF SCIENCES...

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MA820/10 UNIVERSITY OF KENT FACULTY OF SCIENCES LEVEL M EXAMINATION POSTGRADUATE DIPLOMA IN ACTUARIAL SCIENCE POSTGRADUATE CERTIFICATE IN ACTUARIAL SCIENCE FINANCIAL MATHEMATICS Friday, 28 May 2010: 9.30 – 12.30 This paper contains 11 questions. Answer ALL questions. The marks allocated are shown at the end of each question. Copies of Formulae and Tables for Actuarial Examinations are provided. Approved calculators may be used. Candidates are advised to show their working on their scripts. Marks might then be awarded for use of a correct method, even if the numerical or algebraic result is incorrect.

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MA820/10 2 1 John has £5,000 and would like to purchase an annuity. He has contacted a financial advisor who has told him he could purchase either of the following annuities; s Y paid annually in arrear for 10 years s X paid monthly in advance for 10 years (a) Calculate Y and X assuming an effective interest rate of 6% per annum. [3 marks] (b) Explain, with reasons, how Y would change if the annual payments were instead received in advance. [2 marks] (c) John has now decided he would like to receive monthly payments in advance which increase monthly with inflation in order to use the money to cover some bills. Calculate the initial monthly payment assuming inflation is expected to be 2% per annum. [4 marks] [Total 9 marks] 2 Mrs Jones is looking to invest some money. She has done some research and has been offered the following rates: s an effective interest rate of 3% per annum s a monthly effective rate of 0.25% per annum s a nominal interest rate convertible half yearly of 3.5% per annum for 2 years after which an effective interest rate of 2.5% per annum will apply s a force of interest of 2% per annum for 3 years after which a nominal interest rate convertible monthly of 3% per annum will apply (a) Calculate the best rate assuming Mr Jones is looking to invest £500 for 10 years. [5 marks]
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2010 - MA820/10 UNIVERSITY OF KENT FACULTY OF SCIENCES...

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