Two Directional Transition A Short Term Disability policy pays a percentage of income in the case that policyholder becomes sick an unable to work. These types of policies have a relatively low probability of an event that qualifies for benefits to be paid and recovery typically occurs quickly after commencing benefits. The model has four states: Healthy (0), Sick (1}, Lapse (2} and Death (3) Healthy (0} - As shown in the above diagram, transitions are allowed from healthy to any other state and from sick to healthy or death. No other transitions are possible. Quizzes Pace 1 Forces of transition are 0.01 from healthy to sick, 5.00 from sick to healthy, 0.05 from healthy to lapse (cancel policy). Transition from healthy to death uses the force of mortality from the standard survival model and from sick to death uses the force of mortality from the standard survival model plus 0.05. All information provided above is for you to understand the policy and not expected to be used to form the actuarial values needed forthe problem. (40) purchases a one-year short term disability policy that pays 90% of weekly income in the case of a qualifying illness or injury for up to six months following the qualifying event. Premium payments are required at the beginning of each week that the policyholder is healthy and benefits are paid at the end of the week when the policyholder is sick. Given a weekly income of 2,000, a force of interest of 5% and the following actuarial values find the weekly premium using equivalence premium principle. em)\" = 0.9508 and calm\" = 00019 40:11 40:1] * This annuity value incorporates allowing for up to 6 months of benefits ifthe policyholder is disabled at the end ofthe year. Weekly premium: Given pi = 0.948635 find what the premium would be if a benefit that refunds 50% of the premiums at the end ofthe year to a policyholder who had no claims during the year. Alternative premium