(a) A life office sells an endowment insurance to a life aged 40 with a term...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
(a) A life office sells an endowment insurance to a life aged 40 with a term of 25 years. Use AM92 ultimate mortality to calculate the single premium and variance of the present value of benefits. The sum insured is $100,000 and interest is assumed to be at 4% per annum. (4 marks) (b) A life office sells n identical and independent policies as in (a). It will charge the premium calculated in (a) plus a loading of 2% to cover variability in experience. Calculate the number of policies the office must sell if it is to have a no larger than 1% chance of making a loss on this business. [Hint: The expected present value of the profit is the premium charged with loading minus the premium charged without loading. Zo.95-1.645, Z0.975-1.96, Z0.99=2.3263.] (7 marks) (a) A life office sells an endowment insurance to a life aged 40 with a term of 25 years. Use AM92 ultimate mortality to calculate the single premium and variance of the present value of benefits. The sum insured is $100,000 and interest is assumed to be at 4% per annum. (4 marks) (b) A life office sells n identical and independent policies as in (a). It will charge the premium calculated in (a) plus a loading of 2% to cover variability in experience. Calculate the number of policies the office must sell if it is to have a no larger than 1% chance of making a loss on this business. [Hint: The expected present value of the profit is the premium charged with loading minus the premium charged without loading. Zo.95-1.645, Z0.975-1.96, Z0.99=2.3263.] (7 marks)
Expert Answer:
Answer rating: 100% (QA)
a To calculate the single premium for the endowment insurance we can use the formula for the pre... View the full answer
Related Book For
Concepts In Federal Taxation
ISBN: 9780324379556
19th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Ghana Water Company Limited (GWCL) Profile Ghana Water Company Limited (GWCL) is a utility company, fully owned by the State. The company is responsible for potable water supply to all urban...
-
A vertically oriented uniform rod of mass M and length l can rotate about its upper end. A horizontally flying bullet of mass m strikes the lower end of the rod and gets stuck in it; as a result, the...
-
1. What aspects of Becos benefits program are likely to appeal to Robert? Explain. 2. In todays work environment, what addition benefits might be more attractive to Robert? Explain.
-
The company is committed to ethical conduct and has no tolerance for fraud and unethical behavior. There are some concerns about abuses in your department. Do you know anything about the concerns I...
-
Pearl Glaze adds direct materials at the beginning of its production process and adds conversion costs uniformly throughout the process. Given the following information from Pearls records for July...
-
-> Let G and H be groups. A function : G H is called a (group) homomorphism if it satisfies (9192) = (91) * (92) for all 91, 92 G. (Note that the product 91*92 uses the group law in the group G,...
-
Refer to the Racquetball Racket case. Review the problem statement and influence chart that were generated for this case in conjunction with the corresponding exercises in Chapter 2. (If this has not...
-
Which of the following is an example of a paralegal engaging in the unauthorized practice of law? A. Recommending a choice of forms to complete to a client B. Preparing a memorandum of law for a...
-
Summit Products, Inc. is interested in producing and selling an improved widget. Market research indicates that customers would be willing to pay $76 for such a widget and that 36,000 units could be...
-
Assume a donor cow came into heat at 8 am on Tuesday December 5, 2023. Please state the days/times of estrus in bovine recipients that would be considered highly acceptable for use with freshly...
-
How to calculate 5 year average growth rate for JetBlue? Growth rate of gross margin was 4.70% per share.
-
On August 1, 2017, Western Corporation acquired Orbit, Inc. for a cash payment of $2.20 million. At the time of purchase, Orbits balance sheet showed assets of $4,400,000, liabilities of $2,650,000,...
-
Create an Echo Client Server Application using TCP Protocol with close chat With a simple explanation code
-
Dumping of goods abroad A) constitutes a general case for permanent tariffs B) may be part of a firm's price discrimination strategy C) may be part of a nation's strategy to rectify its trade deficit...
-
Explain the Hawthorne effect.
-
Determine the total amount of tax due and the amount of the alternative minimum tax in each of the following situations: a. Wilbur Corporations regular tax liability is $180,000, and its tentative...
-
In problem 89 of Chapter 9, you were asked to determine the initial basis of Emelio and Charitas business, investment, and personal use assets. In this problem, you are to determine the adjusted...
-
One primary problem in properly accounting for property dispositions is differentiating capital assets and Section 1231 property. Why is it important to correctly identify as either a capital asset...
-
Assuming that the latent heat of sublimation of ice \(L_{\mathrm{S}}=2500 \mathrm{~kJ} / \mathrm{kg}\) is independent of temperature and the specific volume of the solid phase is negligible compared...
-
Calculate the slope of the solid-liquid transition line for water near the triple point \(T=273.16 \mathrm{~K}\), given that the latent heat of melting is \(80 \mathrm{cal} / \mathrm{g}\), the...
-
Study the state of equilibrium between a gaseous phase and an adsorbed phase in a singlecomponent system. Show that the pressure in the gaseous phase is given by the Langmuir equation \[...
Study smarter with the SolutionInn App