A life insurance company is considering selling 25-year term with-profit endowment policies with an will vest...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A life insurance company is considering selling 25-year term with-profit endowment policies with an will vest at the end of each po icy year (i.e. the death benefit does not include any bonus relating to the initial sum assured of £75,000 Death benefits are payable at the end of the policy year of death. Bonuses polley year of death). The company is considering ti ree different bonus structures: A: Simple reversionary bonus 8 of 2.5% per annum B: Compound reversionary be auses of 1.92308% per annum C: Super compound bonuses 1/here the original sum assured receives a bonus of 1.5% each year and all previous bonuses receive an a Iditional bonus of 3.75% each year.. (i) Calculate the amount payal le at maturity under the three structures. (ii) Calculate the expected present value of benefits under bonus structure B for an individual aged 40 exact at the start, using the fol owing basis:- Mortality: Intefest: AM92 Select 6% pe fannum Expenses: none (iii) Calculate the expected pr sent value of benefits, using the same policy and basis as in (ii) but reflecting the following changes: bunus is attached to term a) Bonuses vest at the start of each policy year (i.e. the death benefit does include any bonus relating to the policy year of death). b) Bonuses vest at the start ofeach policy year and the death benefit is payable immediately on death. 110 stoel A life insurance company is considering selling 25-year term with-profit endowment policies with an will vest at the end of each po icy year (i.e. the death benefit does not include any bonus relating to the initial sum assured of £75,000 Death benefits are payable at the end of the policy year of death. Bonuses polley year of death). The company is considering ti ree different bonus structures: A: Simple reversionary bonus 8 of 2.5% per annum B: Compound reversionary be auses of 1.92308% per annum C: Super compound bonuses 1/here the original sum assured receives a bonus of 1.5% each year and all previous bonuses receive an a Iditional bonus of 3.75% each year.. (i) Calculate the amount payal le at maturity under the three structures. (ii) Calculate the expected present value of benefits under bonus structure B for an individual aged 40 exact at the start, using the fol owing basis:- Mortality: Intefest: AM92 Select 6% pe fannum Expenses: none (iii) Calculate the expected pr sent value of benefits, using the same policy and basis as in (ii) but reflecting the following changes: bunus is attached to term a) Bonuses vest at the start of each policy year (i.e. the death benefit does include any bonus relating to the policy year of death). b) Bonuses vest at the start ofeach policy year and the death benefit is payable immediately on death. 110 stoel
Expert Answer:
Answer rating: 100% (QA)
A 1 For bonus structure A the amount payable at maturity is 175000 x 1 2525 41857... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 8%...
-
An investment will pay $15,000 at the end of each year for eight years and a one-time payment of $120,000 at the end of the eighth year. Determine the present value of this investment using a 7...
-
At the end of each year, Tom invests $2,000 in a retirement account. Joan also invests $2,000 in a retirement account but makes her deposits at the beginning of each year. They both earn 9 percent on...
-
Find the area under one arch of the cycloid x = a(t - sin t), y = a(1 - cos t).
-
Do you believe that Zachariah Crabtree is a person of integrity? What about David Robinson? Defend both of your answers. Does Robinson have an inappropriate relationship with Crabtree? Explain.
-
The traditional income statement for Pace Company shows sales $900,000, cost of goods sold $600,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed,...
-
What are some of the nonverbal clues to deception?
-
Presented below are the financial statements of Kurtzel Company. Additional data: 1. Depreciation expense was $17,500. 2. Dividends declared and paid were $20,000. 3. During the year equipment was...
-
= 1, 2, 3,.... Problem 3.32. Suppose (xi) 1 C R and xi xi+1 for all i Show that there is an x* = (-, 0] such that x converges to x*. That is {x} x*, though perhaps x* .
-
Publishing Company, Inc. ("P") is a publicly traded C corporation engaged in the publication of professional textbooks. P has 5 million shares of voting common stock outstanding. The stock is...
-
Q. 7 For the transfer function T (s): 65 (s+6) (10) sketch the Bode asymptotic s(s+2)(s+3) magnitude and asymptotic phase plots.
-
How do service companies use a job order costing system? List two ways they do this.
-
How is total fixed cost calculated?
-
Briefly explain the process costing system.
-
Briefly describe the weighted average method.
-
What is a sales mix? Provide an example of a sales mix.
-
Express each function as a composition of two functions. (Find f(x) and g(x) such that the given function equals (fog)(x). Assume g(x) = x.) (a) F(x)=2x + 8 f(x) g(x) = (b) = g(x) f(x) = (c) G(X) =...
-
Ludowicz acquired 20% of the common shares of Sitar on January 1, 2012 for $22,000. At this date, all the identifiable assets and liabilities of Ludowicz were recorded at fair value. An analysis of...
-
Enviroclean is a not-for-profit organization formed on January 1, 2010. The organization's motto is "clean your environment." Enviroclean was formed to help people and organizations that want to...
-
Harwood acquired a 40% interest in Lexor for $170,000 on January 1, 2013. The share capital, cumulative other comprehensive income, and retained earnings of Lexor at the acquisition date and at...
-
Draw a block diagram for the feedback control of a liquid-level system, which consists of a valve with a control knob (0\%-100\%) and a liquid-level sensor. Clearly label essential components and...
-
A control system is represented using the block diagram shown in Figure 10.59. Sketch the root locus with respect to the proportional control gain K. Determine all the values of \(K\) for which the...
-
Roughly sketch the root locus with respect to \(K\) for the equation of \(1+K L(s)=0\) and the following choices for \(L(s)\). Make sure to give the asymptotes, arrival or departure angles, and...
Study smarter with the SolutionInn App