. Set up the problem (you do not need to do the calculations) for determining the minimum premium an insurance company should charge for a $5 million three-year term life insurance contract issued to a man aged 60. 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 6% per annum (with semiannual compounding). Here are the mortality rates from Table 3.1 (5th edition) that you need for the calculations:

Age (Years) 60 61 62 Probability of death within 1 year 0.011197 0.012009 0.012867

Hint: Recall that 6% with semiannual compounding means 3% every six months, and, therefore, the 6- month PV factor is 1/1.03.