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
* I
Reprinted 199 I

Pi-inled in G r a r Drit,iin
:itthe 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. F I N I T E D I F F E R E N C E S
Newton’s formula: ux+,,,, = u~+ri~l)Au,+n(z)A2u,+. . .
Newton’s divided-difference formula :
U, = u,+(x-cI) Au.+(X-(I)(X-b) A%,+. . .
b br

Lagrange’s interpolation formula :

U, -
(x-a)(x-b). . .(x-k)-
1
U,
(a-b)(a-c). . .(a-k)’x-a
1
+( 6 - a ) ( b - c ) .
ub
..(b-k)’x-b
+ ...
Gauss’s forward formula:
U, = U O 1 +(x+
+x~~)Au~+x(~,A ~ u - 1)(3)A3u- 1 +(x+ l),,) + .. .
Gauss’s backward formula :
U, = UO +x(l)AU- 1 +(x + I)(,) AZu- 1

.
+ ( X + ~ ) ( ~ ) A ~ U ~ ~ + ( X + ~ ) ( ~. , A ~ ~ - ~ + .
I a
Summation by parts: 1(U, Au,)
1
= [ux 0,]1’ -E 1
(U,+ Au,)

(l+A)’ E &= du, - AuX-- A%, +--

_ A%,
dx 2 3 ..*
Negative There are two formulations, one typically for Subject I
Binomial 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 kq
E ( X ) = -, Var(X) =-
P P2

For subject 5:
Parameters: k > 0; 0 < p < 1 with q = 1-p

PF. P(X = x) = (“ +;-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 = 1

2.4. CONTINUOUS DISTRIBUTIONS

Normal Parameters: - cc < p < 00, 0 >0

MGF. M ( t ) = exp pf

E ( X ) = p, V a r w ) = n2
1
(a + - a2t2

Gamma . Parameters: c! > 0 , A > 0

. *
AaXa -I
PDF.f(x) = -e p A x ,x >O
r(a)
MGF.M(t)=
( ;)-’
I-- ,t<E.

Exponential Parameter: 1 > 0

PDF. f(x) = Ae-A“, x >0

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

Chi-square 12 is Gamma with a = n2 and I = -.21 -

where n is a positive integer

Beta Parameters: a > 0, j > 0

MGF.
a
E ( X ) = -Var(X) =
c! + p’ (a+ B>’(a + P + 1)
Lognormal Parameters: - CO < p < C O , CJ >0

PDF.f(x) =
exp{ -i(%)2} ,x>o
XCJ&

MGF. -

L
. { +3
E ( X ) = exp p -0' , Var(X) = exp(2p + a'}. [exp{a2)- I]

Pareto Parameters: 2 > 0, ,I> 0

PDF. f@) A a i " ( l + x ) - ~ - ' ,x > 0
MGF. -
E ( X ) = L/(a- I), Var(X) = a,12/{(a- I)'(a-2)}

Generalised Parameters: tl > 0, E. > 0, k > 0

Pareto
T(cr + k)l"xk I -

PDF.f(x) = x > o
r(a)r(k)(i + x ) ~ + ~ '
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) = cyx'-lexp{ -cxy}, x > 0
MGF. -

Burr Parameters: a > 0, ,I> 0, y > 0

PDF. f ( ~=
) ayi"xS-'(EL xY)-. + I, x >0
MGF. -
2.5. COMPOUND D I S T R I B U T I O N S

Compound
Poisson
N - Poisson (A), { X , } zI i i d.
N
Y= X,(=OifN=O)
I = 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- 1
(a) For a single sample of size n under the normal model
X - N(P, a*)

(ii)
(n- 1)S2
U2
- x,- 1

(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 Y - 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
s.e. ( j )
- t a p , where s.e. (6) = [C?~/S~J’

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

(a) Single factor normal model Y,, - N(p + T,, a’) with
i = 1, 2 , . . . , k ; j = I , 2, . . . ,n,;n = Zn,;&,T, =0

Under the appropriate null hypothesis:

ss, --
where
1
ss, = ZZ(y,-j. .)2 = cZy:--y?
n
1 1
ss, = Zn;(jj;.- y , .)’ = C-y’.--y?
ni n
SSR = ss,- SS,
(b) Two factor no interaction normal model Y ,
with
- N ( p + 7 i + b,, a2)

i = 1,2, . . . , k;j = I, 2 , . . . , b; Z 7 i = Xj?, = 0

Under the appropriate null hypotheses:

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

where * .

I
SST = CC(y,; -j . . )' = xzy; --
bk
yf .

1 1
ss, = b C ( j i .- j . .)* = -cy:.
b
--
bky'
1 1
SS, = k C ( j . , - J . . ) Z = -xyt,-
k

2.9. NONPARAMETRIC INFERENCE

(a) Single sample, size n

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

Var ( W ) ,=
n(n + 1) (2n + 1 )
6
(b) Two samples, sizes n and m
(i) The Run Test
Under the appropriate null hypothesis:
2mn
E ( R ) = -+ I
m+n
2mn (2mn -rn -n)
Var(R) =
+
( 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 = XJn
J = I

N
8= f,/N
I = 1

Parameter estimation:
Quantity Estimator

N n

V"6)l ( N - 1)-1 1 (X,-X)'-

i= I

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

P i =,= P,c 1
P= 1 Pi
I = 1

..
N
P* = ( N n - l ) - ' 1P,(I-P;/P)
__ I-= I

Parameter estimation:
Quantity Estimator
E"0 )I x
h' n

E[s2(@1

3 . COMPOUND INTEREST
1-U" (l+i)"-1 1 = --
- 1
urn= - sm = i
i i sm am
am - nu" n-a,
(Ia), =-
j
(Du), = - a

--1
ai,nndi
1
-~ + ( i ' - i )
al %I

where akandiis 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.

certain net of tax:

Value of annuity_.- a;-- tg (a&- 03where:
L i -g
g is the original rate of interest;
t is the rate of tax on interest.
1
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 ix==ex++-&px
1,
Gompertz's law: px = BcX; rpx= g' -(
t - 1 )

Makeham's law: p, = A +Bc"; rp, = s'g' =(& - I )

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

A=l-dii A= 1-6d
1 1
P=z-d P=,-s
a a

m-1
,v;m; = ,v,:,+-P:~.
2m
yf:,
 PREFACE
Actuarial tables for the use of students preparing for and sitting examina-
tions 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 Hypo-
~

thetical 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~turrricilE.~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 v: MANCHESTER

UNITY
Sir KNESS EXPERIENCE
1893-97
(A,H,J.) COMBINED WITH THt
MORTALITY RATFS OF THE E N G -
LISH L I F ETABLE
NO. ~ ~ - - M A
FS I

82-83 Rat&dI.sickness . . . . .
8485 Value of sickness benefits of 1 per
week for the whole of life in
periods . . . , . . .
86-87 Commutation columns for sick-
nessbenefit values . . . .

89-94 Stcrirn V I : Pt\siox FUND

TABLES

90 Service table and relative salary

scale . . . . . . . . . -

91 Contribution functions . . . . 4)0

02 Ill-health retirement functions. . 4",>
93 Age retirement functions . . . 4"0
94 Functions for payment on death
o r withdrawal . . . . . 4"0

95 104 SECTIOS VII: ISTERYATIOUI

ACTI.ARIAKOTATIOS
L

105 1 18 S r C T I O U VIII: ST,4TISTl(.hL TABI

ES

106 Standard Normal Distribution:

values of the densit! function
and of the distribution function
107 Critical points of the f distribu-
tion . . . . . . . .
,

108- 1 I 1 F distribution: 5 per cent and 1 per

cent critical points . . . .
I12 Critical pointsof Students' rdistri-
bution . . , . . . .
113-1 16 Cumulative Poisson distribution
1 17 Values of the negative exponential
118 Random n u m b e r s . . . . .