Let's assume that we have a portfolio of 100 whole life insurance policies. You are also given the following information: 

• each of the 100 lives, all currently age x, are independent 
• each of the 100 lives are subject to a constant force of mortality, u = 0.02 
• for each policy, a death benefit of 50 is payable at the moment of death 
• the death benefit payments are withdrawn from an investment fund that earns 8 = 0.04 . . 

Calculate the minimum amount needed in the fund, at time t = 0, such that there is a 95% chance that sufficient funds will be on hand to withdraw the benefit payment upon the death of each individual.

Answer rating: 100% (QA)

ANSWERS The minimum amount needed in the fund at time t0 is 1000000 WORKING From ... View the full answer