Assignment of Risk Management and Insurance

Name: - SHASHO TUJUBA ID No: - 0527/16

1 Choose the best answer
1. B 6. D 11. D
2. C 7.B 12 . C
3. B 8.B 13. D
4. A 9. B 14. C
5. A 10. D 15. B

2. Matching
16. D 17. F 18 . B 19 . A 20 . E

3. Workout
1. Step 1:- On the basis of the information provided calculate the net single premium and
convert to net level premium.

Age Number of living Number of living Policy amount EFDC

61 20,000 200 5,000 1000,000
62 19,800 300 5,000 1,500,000
63 19,500 400 5,000 2,000,000
Step 2:- Compute the present value of EFDC
Year EFDC PVIF (5%) PV(EFDC)
61 1,000,000 0.6523 952,381
62 1,500,000 0.607 1,360,544.20
63 2,000,000 0.8638 1,727,676
Step 3:- Calculate NSP
Total PV ( EFDC) 4.040 .601
NSP = = = 202.03 birr
Original Population 20,000

Step 1:- To convert Net Single Premium to Net Level Premium

Year Insured Paying PVIF (at 5%) PV of 1 birr
Premium(1)
61 20,000 1 20,000
62 19,800 0.952 188,555.54
63 19,500 0.907 17686.5
Total PV of 1 birr premium = 56,543.00
Step 2:- Compute PV of 1 birr premium per insured
Total PV of 1 birr premium
PV of 1 birr premium per insured = 56543
Original Population ¿ ¿ =2.827 ¿
20,000

NSP 202.03
Step 3:- Compute the Net Level Premium (NLP)¿ PV of 1 birr Premiume = 2.827 =71.464

NLP = 71.464 for a year

2. Given Total population =1, 500,000, Number people expected die =500, Death benefit
in one year of birr 10,000, Interest rate =3%

Then Compute net single premium

Step1:- Compute expected future death claim (EFDC)

EFDC = policy amount × Number of people death =10,000 × 500 = 5,000,000
EFDC 5,000,000
Step 2:- Find PV (EFDC) =
( 1+i )
= ( 1.03 )

PV (EFDC) = 4,854,368.932

Step 3:- Find the NSP per insured person

PV ( EFDC) 4,854,368.932
NSP = =
Original Population ¿ ¿ ¿ 1,500,000

NSP = 3.236 birr