1) Suppose that we back-test a VaR model using 1,300 days of data. The VaR confidence level is 99% and we observe 15 exceptions. Should we reject the model at the 5% confidence level? Use Kupiec's two-tailed test.

2) Given the following extract from the current life table to calculate the minimum premium CanLife insurance Company should charge for a $1 million 5-year term life insurance contract issued to a women aged 60.

Age Probability of dying within one year

60 0.006880

61 0.007454

62 0.008006

63 0.008515

64 0.009025

Assume that the premium is paid at the beginning of each year and death always takes place halfway through a year. The risk-free interest rate is 4% per annum (with semi-annual compounding).