FORMULAE AND TABLES

FOR

A C T U A R I A L .EXAM I N A T I O N S
(INSTITUTE OF ACTUARIES)

T H E INSTITUTE OF ACTUARIES
AND T H E FACULTY OF ACTUARIES

1980

'

First published 19x0 Reprinted 1983 Reprinted 19XX Rcpriiited 1990 Reprinted 199 I

:it

Pi-inled in G r a r Drit,iin the 4lden Press. Oul'ord

FORMULAE A N D TABLES FOR ACTUARIAL EXAMINATIONS

( I N S T I T U T E OF. A C T U A R I E S )

INSTITUTE OF ACTUARIES
Formulae for the use of Candidates at the Examinations
SEE ALSO HEADINGS TO 1NDIVIDUAL rABLES

The list given below is intended to help candidates with formulae which may be found hard to memorize. Inclusion in the list does not mean that a proof may not be required.
1

1. F I N I T E D I F F E R E N C E S

Newtons formula: ux+,,,, = u~+ri~l)Au,+n(z)A2u,+. . . Newtons divided-difference formula :

U,

= u,+(x-cI) Au.+(X-(I)(X-b)
b

A%,+. . .
br

Lagranges interpolation formula :

U,

(x-a)(x-b). . .(x-k)U,

(a-b)(a-c). . .(a-k)x-a

+( 6 - a ) ( b - c ) .
ub

1 ..(b-k)x-b

+ ... + .. .

Gausss forward formula:

U, = U O

+x~~)Au~+x(~,A 1 +(x+ ~ u - 1)(3)A3u- 1 +(x+ l),,)

Gausss backward formula :

U, = UO

+x(l)AU- 1 +(x

+ I)(,) AZu1(U, Au,)

1
I

+(X+~)(~)A~U~~+(X+~)(~ ., A ~ ~ - ~ + . Summation by parts:

= [ux 0,]1

-E
3

(U,+

Au,)

(l+A)

& =

A%, _ du, - AuX-- A%, +-dx

2

..*

Negative Binomial

There are two formulations, one typically for Subject I and one typically for Subject 5.

For subject 1 : Parameters: k, a positive integer; 0 < p < 1 with q = 1- p

PF. P ( X = X) =

(iI:)

pkqx- x = k, k

+ 1, k + 2 , . . .

k E ( X ) = -, Var(X)

=-

kq P2

For subject 5: Parameters: k > 0; 0 < p < 1 with q PF. P(X

= x) =

1-p

+;-l)Pv.

x = 0, I , 2,

PGF. G(s) = (I

,,)

k9 kq E ( X ) = -, Var(X) = P P2

The two formulations are of course connected, each differing from the other by a shift in location. In particular, if X , is as in the subject 1 formulation and X , as in the subject 5 formulation with an integer value fork, then X , = X , + k . Geometric Negative Binomial with k
=

2.4.

CONTINUOUS DISTRIBUTIONS

Normal

c <p < Parameters: - c

00, 0

>0

MGF. M ( t ) = exp pf
1

E ( X ) = p, V a r w ) = n2 Gamma
.
. *

(a
+ - a2t2
>O
,t<E.

Parameters: c !> 0, A > 0

AaXa

-I

PDF.f(x)

=e p A x ,x

r(a)
I--

MGF.M(t)=

( ;)-

Exponential Parameter: 1 > 0 PDF. f(x)

= Ae-A, x

>0

E(X)
Chi-square

1/ i . Var(X) , = I/;?
-

1 12 is Gamma with a = n and I = -. 2 2

where n is a positive integer Beta Parameters: a > 0, j > 0

MGF.
E ( X ) = -Var(X) =
c !

+ p

(a+ B>(a

+ P + 1)

Lognormal

Parameters: - CO < p < exp{ PDF.f(x) MGF. E ( X ) = exp p

L

C O , CJ

>0

-i(%)2}
,x>o
XCJ&
-0'

. { +3

, Var(X) = exp(2p

+a ' } .

[exp{a2)- I]

Pareto

I> 0 Parameters: 2 > 0, ,

PDF. f@) A a i " ( l MGF. -

+ x ) - ~ - ' ,x > 0
= a,12/{(a-

E ( X ) = L/(a- I), Var(X)

I)'(a-2)}

Generalised Parameters: tl > 0, E . > 0, k > 0 Pareto T(cr + k)l"xk I PDF.f(x) =

-

r(a)r(k)(i + x ) ~ + ~ '

x > o

MGF E [ X ] = i k / ( a - I), Var[X] = i 2 k ( k + a- I ) / { ( a - I)'(cr-2)} Weibull Parameters: c > 0, y > 0 PDF.f(x) MGF. =

cyx'-lexp{ -cxy}, x > 0

Burr

Parameters: a > 0, , I> 0, y > 0 PDF. f ( ~= ) ayi"xS-'(EL xY)-. MGF. -

I,

x >0

2.5.

COMPOUND D I S T R I B U T I O N S

Compound Poisson

Poisson (A), { X , } zI i i d.
N

Y=
I =

X,(=OifN=O)
1

MGF. of Y. M,,(t)

= exp{l(M,(r)-

1))

where M,(t) is the MGF of X,

L

2.6.

PARAMETRIC INFERENCE, NORMAL MODEL

The random sample (x,, x2, . ?2 ,k , ) has mean R and variance

32

cx2- (Cx)2/n
n-

(a) For a single sample of size n under the normal model

N(P, a*)

(ii)

(n- 1)S2
U2

- x,-

(b) For two independent samples of sizes rn and n under the normal models X N(px, , ) : a Y N(p , , , a , > respectively

(ii)

under the additional assumption : a

a ,

2.7.

N O R M A L L I N E A R R E G R E S S I O N MODEL

N(a

+ Sx, a)

The usual estimates, based on bivariate data ( y , x ) of size n, are

a=y-/jx

B = ~x,lsxx

li-lr
2.8.

s.e. ( j )

t a p , where s.e.

(6) = [C?~/S~J

A N A L Y S I S OF V A R I A N C E

(a) Single factor normal model Y,,

i = 1, 2 ,

- N(p +

T,, a )

with
=0

. . . , k ; j = I , 2, . . . ,n,;n = Zn,; &,T,

Under the appropriate null hypothesis:

ss,
where

-.)2
= cZy:--y?

ss, = ZZ(y,-j.
ss, = Zn;(jj;.- y ,
SSR =

1 1 .) = C-y.--y? ni n

ss,-

SS,

(b) Two factor no interaction normal model Y , with

i = 1,2,

N ( p + 7 i + b,, a2)

. . . , k;j = I, 2 , . . . , b; Z 7 i = X j ? ,=0

Under the appropriate null hypotheses:

where
* .

Fb- l,(b- I)(k- I)

SST = CC(y,; -j . . )'

I xzy; -yf . bk
1
--

1 ss, = b C ( j i .- j . .)* = -cy:. b

1

bky'
1

SS, = k C ( j . , - J . . ) Z = -xyt,-

2.9.

NONPARAMETRIC INFERENCE

(a) Single sample, size n

Wilcoxon signed rank test Under the appropriate null hypothesis:
E(W)= 0

Var ( W ) ,=
(b) Two samples, sizes n and m

n(n

+ 1) (2n + 1 )
6

(i) The Run Test Under the appropriate null hypothesis:

E ( R )= + I m+n

2mn

Var(R) =

2mn (2mn -rn -n) ( m n)*(rn n- 1)

(ii) Wilcoxon-Mann-Whitney Test Under the appropriate null hypothesis:

Var ( W,) =

mn(m

+ n + 1)
12

2.10.

B A Y E S I A N METHODS
. r

f(0lx) ccf(xlf))f(@)

For x a random sample of size n from N ( p , 0 2 ) ,a2known, and a N(po,ai) prior for p, then
PI&

N(P*P,3

2.1 1.

EMPIRICAL BAYES CREDIBILITY

Model 1 . Data { { X , , } , f , } , ~ l
X,J represents the aggregate claims in thej-th year from the i-th risk.
n

'Ft =
J =

XJn
I N

8=
I =

f,/N
1

Parameter estimation: Quantity Estimator

V"6)l

( N - 1)-1
N

1 (X,-X)'i= I

Yi, represents the aggregate claims in thej-th year from the i-th risk; P, is the corresponding risk volume.

P i =,= P,
1

P=
..
N

1 Pi
I =

P* = ( N n - l ) - '

__

1P,(I-P;/P)
I-=

Parameter estimation: Quantity Estimator

E"0

)I
h '

x
n

E[s2(@1

3 . COMPOUND INTEREST
urn= 1-U"

sm =

(l+i)"-1
i

1 = -1 -

i
am - nu" (Ia), =j

sm

am

(Du), =

n-a, a

1 -ai,nndi
al

1 -~ + ( i ' - i )
% I

where akandi is the value of an annuity certain of 1 p.a. payable in arrear for n years to yield remunerative rate ' i after allowing for replacement of capital by accumulation at reproductive rate i .

Makeham's formula: A = K+p(I-t)(C-K) g

where:

A is the present value of capital and net interest payments; K is the present value of capital payments; C is the total capital to be repaid (at redemption price); g is the rate of interest expressed per unit of the redemption price; t is the rate of tax on interest.
Value of annuity_.certain net of tax:
L

a;--

i -g

tg (a&-

03where:

g is the original rate of interest; t is the rate of tax on interest.

Capital redemption policies : A, = 1 - d aa

P ---d

"-&

4. LIFE A N D O T H E R C O N T I N G E N C I E S

ex sz

1,
px = BcX; rpx= g '
p, = A +Bc";

Gompertz's law: Makeham's law:

ix==ex++-&px

t - 1 ) (

rp, = s ' g ' =(& - I )

where B/log, c = -log, g and A = -log, s.

A=l-dii 1 P=z-d a

A= 1-6d

P=,-s
a

,v;m;

= ,v,:,+-P:~.

m-1

2m

yf:,

PREFACE
Actuarial tables for the use of students preparing for and sitting examinations were first published by the Institute of Actuaries in 1912 under the title A Short Collection of Actuarial Tuhles. In 1952 the Institute of Actuaries a n d the Faculty of Actuaries jointly had published Actuarial Tuhles -for E.ramirrution Purpose; (Cambridge University Press), which contained certain additional and more up-to-date tables. It is now thought desirable to produce a third set of t'ablks. again using more modern tables and adding certain others; these generally correspond with tables included in the textbook Lifb Contingencies by A . Neill (Heinemann, 1977). The main changes from 1952 are: replacement of English Life Tuhk No. 10 -Mtrlr,.s bq English Lifk Tuhle N o . I.? Moles; replacement of Hypothetical Select Mortality by A1967 70: replacement of u ~ t ? i Jand u i f ' l annuitants' mortality by ~ ( 5 5I. ,use o f a more modern basis in the Pension F u n d Tables: extension of the range of rates of interest in the Compound Interest section: omission of Premium Conversion Tables and o f a table of Officc Premiums for Contingcnt Assurances: a n d inclusion of additional Statistical Tables. a statement of the International Actuarial Notation. and Tables of Logarithms, Antilogarithms and Reciprocals.
~

The following tables have been printed. by the authority a n d under the superintendence of the Institute of Actuaries and the Faculty of Actuaries. in order that candidates presenting themselves for examination may hake ;I compact means of working out actuarial problems in their studies and in the examination room. The particular tables which are included have been selected a s being, o n the &hole. the most suilable for [his special purpose: but the Councils of the Institute and the Faculty desire it to be distinctly understood that they d o not express any opinion whatever a s to the circumstances in which any of the tables may be suitable for use in practice. The thanks of the Councils are given to those firms of consulting actuaries who have supplied material for inclusion in these tables. particularly in sections V a n d VI. The tables are published simulteneou4y in two versions: Forniirkir r i d Tuhlr.s,for.ActuurI~11 E.i-urninurion.s for the Institute of Actuaries and Tirhlrs ,fOr ,4c~turrricil E.~riniincrrion.sfor the Faculty of Actuaries. ,\part from a list of formulac the tables are the same.

CONTEYTS

TABULATED VALUES
Page Function Rates of Interest

81-87

SECTION
(A,H,J.)

v:

MANCHESTER UNITY
WITH

Sir KNESS EXPERIENCE 1893-97

COMBINED

THt

MORTALITY RATFS OF THE E N G LISH

LIFE TABLE NO. ~ ~ - - M A FS I

82-83 8485

86-87
89-94

Rat&dI.sickness . . . . . Value of sickness benefits of 1 per week for the whole of life in periods . . . , . . . Commutation columns for sicknessbenefit values . . . .

Stcrirn V I : TABLES

Pt\siox

FUND

90

91 02 93 94

Service table and relative salary scale . . . . . . . . . Contribution functions . . . . Ill-health retirement functions. . Age retirement functions . . . Functions for payment on death o r withdrawal . . . . .

4)0

4",>
4"0

4"

95 104

SECTIOS VII: ISTERYATIOUI ACTI.ARIA KOTATIOS L

S r C T I O U VIII: ST,4TISTl(.hL TABI ES

105 1 18

106

107
108- 1 I 1

I12
113-1 16 1 17 118

Standard Normal Distribution: values of the densit! function and of the distribution function Critical points of the f distribution . . . . . . . . F distribution: 5 per cent and 1 per cent critical points . . . . Critical pointsof Students' rdistribution . . , . . . . Cumulative Poisson distribution Values of the negative exponential Random n u m b e r s . . . . .
,