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course5_1101 - November 2001 Society of Actuaries COURSE 5...

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November 2001 Society of Actuaries COURSE 5 MORNING SESSION APPLICATION OF BASIC ACTUARIAL PRINCIPLES SECTION A-WRITTEN ANSWER
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COURSE 5: November 2001 - 2 - GO ON TO NEXT PAGE Morning Session **BEGINNING OF EXAMINATION 5** MORNING SESSION 1. (5 points) With respect to participating life insurance products, (a) Explain the rationale for offering participating products. (b) Describe the considerations in setting policyholder dividends. (c) Describe the concerns regulators have with policyholder dividends. 2. (6 points) Describe the rating variables that should be considered when developing group insurance medical claim costs. 3. (6 points) Describe each of the following provisions which can be included in an individual disability income contract: (a) Residual Disability Income Benefit; (b) Guaranteed Insurability Option Benefit; and (c) Cost Of Living Benefit.
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COURSE 5: November 2001 - 3 - GO ON TO NEXT PAGE Morning Session 4. (5 points) You are given the following retirement plan information for an individual: Current Age 40 Entry Age 30 Retirement Age 65 Social Security Benefit $11,700 Current Salary $80,000 Annual Salary Growth 3% Personal Savings Accumulation Rate 7% Final Salary (at age 64) $162,624 Retirement Benefit 1% of final 5-year average salary times years of service Annuity Conversion Factor @ age 65 8.1958 The individual begins saving for retirement at his current age. Calculate the level percent of salary that should be allocated to personal savings each year to provide this individual with a 70% full replacement ratio. Show all work. 5. (8 points) Describe the following reserve methods for life insurance products: (a) simplified net premium method; (b) realistic net premium method; (c) gross premium method; and (d) accumulation method.
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