A life insurance company is planning to market a 3-year unit-linked endowment policy with details: ...

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A life insurance company is planning to market a 3-year unit-linked endowment policy with details: • A level premium of $2,000 payable annually in advance; ▪ 98% of each premium is allocated to purchase units at the offer price; ▪ Units are subject to a bid-offer spread of 5%; The annual management charge is 1.5% of the bid value of the units and is deducted at the end of each year immediately before the payment of any benefits due at that time; ▪ On death before the end of the term of the policy, the greater of $6,000 and the bid value of the units is paid out at the end of the year of death; • Initial expenses are $200 and annual expenses of $20 per annum are incurred at each policy anniversary and grow at an inflation rate of 5% per annum from the date of issue of the policy; • It is assumed assets in the unit fund will grow at 9% per annum while the rate of interest on the non-unit fund will be 6% per annum; • The relevant 2-year select death rates are: q[60]=0.03, q[60]+1=0.035 and 962-0.04. Calculate the profit signature for such a policy sold to a 60-year old. A life insurance company is planning to market a 3-year unit-linked endowment policy with details: • A level premium of $2,000 payable annually in advance; ▪ 98% of each premium is allocated to purchase units at the offer price; ▪ Units are subject to a bid-offer spread of 5%; The annual management charge is 1.5% of the bid value of the units and is deducted at the end of each year immediately before the payment of any benefits due at that time; ▪ On death before the end of the term of the policy, the greater of $6,000 and the bid value of the units is paid out at the end of the year of death; • Initial expenses are $200 and annual expenses of $20 per annum are incurred at each policy anniversary and grow at an inflation rate of 5% per annum from the date of issue of the policy; • It is assumed assets in the unit fund will grow at 9% per annum while the rate of interest on the non-unit fund will be 6% per annum; • The relevant 2-year select death rates are: q[60]=0.03, q[60]+1=0.035 and 962-0.04. Calculate the profit signature for such a policy sold to a 60-year old.

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ANSWER The profit signature for such a policy sold to a 60year old would be as follows Yea... View the full answer