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

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Unformatted text preview: November 2001 Society of Actuaries COURSE 5 MORNING SESSION APPLICATION OF BASIC ACTUARIAL PRINCIPLES SECTION A-WRITTEN ANSWER 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. 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. COURSE 5: November 2001- 4 - GO ON TO NEXT PAGE Morning Session 6. (5 points) You are given the following information for a defined benefit plan: Plan Effective Date: 01/01/2001 Plan Year = Calendar Year Normal Retirement Benefit: 2% of final three-year average pay for each year of service Actuarial Cost Method: Entry Age Normal Actuarial Assumptions: Interest: 8.00% Salary Scale: 5.00% Preretirement termination other than death: None Data for the 10 active participants as of 1/1/2001 (there are no inactive participants): Age: 45 Past Service: 5 years 2001 Salary: $25,000 Plan Assets at 1/1/2001: Selected annuity values: && a 65 12 10 b g = && a 10 7 = Selected Commutation Functions: X D X N N X- 65 S X S X S N N- 65 40 245 3200 1.0000 7100 45 180 2100 1.2763 5000 65 50 3.3864 The supplemental liability is amortized over 10 years. Determine the annual cost as of December 31, 2001 for the 2001 plan year based on an initial valuation as of January 1, 2001....
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This note was uploaded on 03/27/2012 for the course MATHEMATIC 4523 taught by Professor Zhangqiang during the Spring '12 term at City University of Hong Kong.

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

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