5. A life insurance is for independent (x)&(y). & pays 2000 at T(xy), 1000 at T(xy), 8 = 0.04, x(t) = 0.02, y(t)= =0.03.

(a)Calculate the covariance between the first and the second death times.

(b)Calculate APV of the benefits.

(c)Calculate Var of the PV of benefits.

(d) If (x)&(y) are subject to a common shock, the time of shock follows exponential distribution with mean 50. Calculate the APV of benefits under the shock.

Answer rating: 100% (QA)

a To calculate the covariance between the first and second death times we need the individual probabilities of death for x and y as well as their corr... View the full answer