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    6 of 6 - Assignment - Practice

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    tian jin
    I. The document describes calculating the standard deviation of the present value of a 3-year endowment insurance policy of $100,000 on a life aged 60. II. It provides the mortality assumptions and interest rate to calculate survival probabilities and possible present values. III. The standard deviation is calculated to be $1,096.28 using the possible present values and their probabilities in a data table and statistical function.

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    6 of 6 - Assignment - Practice

    Uploaded by

    tian jin
    21 views3 pages
    I. The document describes calculating the standard deviation of the present value of a 3-year endowment insurance policy of $100,000 on a life aged 60. II. It provides the mortality assumptions and interest rate to calculate survival probabilities and possible present values. III. The standard deviation is calculated to be $1,096.28 using the possible present values and their probabilities in a data table and statistical function.

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    I. The document describes calculating the standard deviation of the present value of a 3-year endowment insurance policy of $100,000 on a life aged 60. II. It provides the mortality assumptions and interest rate to calculate survival probabilities and possible present values. III. The standard deviation is calculated to be $1,096.28 using the possible present values and their probabilities in a data table and statistical function.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    21 views3 pages

    6 of 6 - Assignment - Practice

    Uploaded by

    tian jin
    I. The document describes calculating the standard deviation of the present value of a 3-year endowment insurance policy of $100,000 on a life aged 60. II. It provides the mortality assumptions and interest rate to calculate survival probabilities and possible present values. III. The standard deviation is calculated to be $1,096.28 using the possible present values and their probabilities in a data table and statistical function.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    2023/4/15 23:47 6 of 6 - Assignment - Practice

    6 of 6 Finish Assignment

    For a fully discrete 3-year endowment insurance of 100,000 on (60), you are given:

    Z is the present value random variable for this insurance.


    I.

    II. μx is the force of mortality for a life age x under the Standard Ultimate Life Table.
    ∗

    III. μ60+t = 0.8μ60+t + 0.01


    ∗

    IV. i = 0.05

    Calculate the standard deviation of Z .

    13% A 1,050

    47% B 1,100

    Exhibit

    Solution

    Written Solution
    First, calculate the survival probability:

    https://account.coachingactuaries.com/fam/learn/assignment/13667960?page=6 1/3
    t
    2023/4/15 23:47 6 of 6 - Assignment - Practice

    tp60 = exp − 0 μ60+sds


    ( ∫ )

    t
    = exp − 0 (0.8μ60+s + 0.01)ds
    ( ∫
    ∗
    )

    t t
    = exp −0.8 0 μ60+sds − 0 0.01ds
    ( ∫
    ∗
    ∫ )

    t 0.8
    = exp − 0 μ60+sds ⋅ exp(−0.01t)
    [ ( ∫
    ∗
    )]

    = (tpSULT
    60 ) ⋅ exp(−0.01t)
    0.8

    Thus, we have:

    1 p60 = (1 pSULT
    60 ) ⋅ exp(−0.01 ⋅ 1)
    0.8
    = (1 − 0.003398)0.8 ⋅ exp(−0.01 ⋅ 1)
    = 0.987358
    2p60 = (2pSULT
    60 ) ⋅ exp(−0.01 ⋅ 2)
    0.8
    = [(1 − 0.003398)(1 − 0.003792)]0.8 ⋅ exp(−0.01 ⋅ 2)
    = 0.974567
    Next, calculate the possible values of Z . Note that:
    If (60) dies within the first year:
    The PV is Z = 100,000v = 95,238.09524

    The probability is q60 = 1 − 0.987358 = 0.012642

    If (60) survives the first year and dies within the following year:

    The PV is Z = 100,000v2 = 90,702.94785

    The probability is 1 q60 = p60 − 2p60 = 0.012791


    |

    If (60) survives the first two years:

    The PV is Z = 100,000v3 = 86,383.75985


    The probability is 2p60 = 0.974567

    Summarize the PV's and the corresponding probabilities in a table:

    https://account.coachingactuaries.com/fam/learn/assignment/13667960?page=6 2/3
    2023/4/15 23:47 6 of 6 - Assignment - Practice

    Z Probability
    95,238.09524 0.012642
    90,702.94785 0.012791
    86,383.75985 0.974567
    Z
    To find the standard deviation of , we can use the data table and stat function on the TI-30XS
    MultiView. Enter the following into the data table:

    L1 L2

    95,238.09524 0.012642
    90,702.94785 0.012791
    86,383.75985 0.974567
    σ=
    Finally, use the 1-Var stat function with "DATA" as L1 and "FRQ" as L2, the resulting standard
    deviation is 1,096.28 .

    Coach's Remark:

    When an insured reaches the final year of an endowment insurance policy (the 3rd year in
    this case), regardless of whether the insured lives or dies, he or she will still get 100,000,
    either as a death benefit or as a pure endowment for surviving. In other words, surviving
    past the end of the second year is a sufficient condition to guarantee that 100,000 will be
    paid.

    https://account.coachingactuaries.com/fam/learn/assignment/13667960?page=6 3/3

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