Middle East Technical University Inst. of Applied Mathematics / Actuarial Sciences IAM582 / Life Insurance Mathematics Assoc. Prof.

Sevtap Kestel

Spring 2013

_________________________________________________________________________________ 15/05/2013 ASSIGNMENT 6 DUE DATE: June 10, 2013

Assume that an actuary is asked to design an insurance plan for a person whose age is the same as yours. Use Excel software and compare the results in different tables (cso 1980 Mortality Table and TRSH 2010) to find the following: (a) You invest a net single premium of TL for an annuity which pays k TL annually after the retirement at age 65. Find the value of . Repeat the question for i=5% and i=7%, and plot the graphs to show the improvements. (b) An additional savings plan is required whose conditions are as follows: (i) Insured must stay at least 10 years in the system. (ii) The savings can not be withdrawn before age 56. (iii) The investment rate during the issue of the life insurance is i. (iv)The savings from the life insurance has to be kept in the system till age (56) is completed. The investment rate of the time between the completion of the required period (10 years) and age limit (56) with an interest rate of j. (v) Insured has 2 options to choose: withdraw the savings by age 56 or leave it to grow in the fund till age 65 with the same interest rate j. You are required to state your choice at the beginning of the contract. Assume you are willing to increase your annual pension payments as double, how much premium you should pay for this additional life insurance ? Repeat the question for (i,j)={(3%, 2.5%), (5%, 5%), (7,5)} and plot the graphs to show the improvements. You should present your assignment both in soft and printed forms.