Ch19-21

q3
let the annual premium be P
EPV of premium=P∗ä [ 50 ] :10 =7.698 P

EPV of Benefit=75000∗( v ∗q [ 50] + 1.0192308 ∗v ∗p[ 50 ]∗q[ 50] +1 … … … . v ∗1.0192308 ∗9 p[ 50 ]∗q59 )

0.5 1 1.5 9.5 9

¿
75000
0.5 (
∗ v ∗q [ 50] +1.0192308 ∗v ∗p[ 50 ]∗q[ 50] +1 .. v ∗1.0192308 ∗9 p [ 50]∗q59 )+75000∗v ∗1.0192308
1 2 2 9.5 9 10

1.0192308∗v

' 1.0192308
let v = ∗v

1.06
i' = −1=0.04 0 r 4 %
1.0192308
0.5
75000∗(1.06 )
EPV of benefit= ∗A 75000∗D
1.0192308 1
[ 50 ] : 1 0∨¿ @ 4 % +
D
60
@4%¿
[ 50 ]

(
¿ 75760.3∗ A[ 50] −
D60
D [ 50 ] )
∗A 60 +
75000∗882.85
1365.77

(
¿ 75760.3∗ 0.32868−
882.85
1365.77 )
∗0.4564 +48480.89

¿ 51030.8

EPV of expense=350+0.5∗P+0.05 P∗¿

¿ 350+0.5 P+0.05 p∗6.698=350+0.8349 P

By principle of equality , EPV of expense+ EPV of benefit =EPV of premium

7.698 P=51380.8+0.8349 P
P=7486.53
(ii)

using the prospective basis reserve at end of 5the year ∨at age 55 will be
5 V =EPV of benefit+ EPV of expense−EPV of Premium

75000∗1.01923085 0.5
EPV of benefit here will be= ∗1.06 ∗A 80937.804∗D
1.0192308 55: 5∨¿ +
D
1 60
@4 %¿
55

(
¿ 83330.57∗ A 55−
D 60
D 55
∗A 60 + )
80937.804∗882.85
1105.41

(
¿ 83330.57∗ 0.3895−
882.85
1105.41
∗0.4564 +64642.025 )
¿ 66849.43
EPV of expense =0.05∗7486.53∗ä 55: 5∨¿=374.3265∗4.585=1716.287 ¿

EPV of benefit=7486.53∗ä( 55: 5|=7486.53∗4.585=34325.74

susbtituing all these values∈5 V

5 V =66849.43+1716.287−34325.74=34239.98

q6
( i ) Gross future loss random variable=PV of benefit + PV of expense−PV of premium
Tx
here PV of benefit= ( 100000−10000∗K [ 55 ] )∗v ,if T x <10

PV of benefit=0 ,if T x >10

PV of expense=300+0.25 P+0.05∗P∗( ä min ( ( K [ 55] +1

−1 ) +50∗9+200 , if T [ 55] <10
) , 10 )

¿ PV of expense=300+0.25 P+0.05∗P∗( ämin (( K [ 55 ] +1 ) ,10 )

−1 ) +50∗9if T [ 55 ] >10

PV of premium=P∗ ämin ( ( K ) ,10 )

[ 55 ] +1

so Gross futurer random variable

Is
( 100000−10000∗K [ 55] )∗v +300+ 0.25 P+ 0.05∗P∗( ämin( ( K −1 )+50∗9+200−P∗ämin ( ( K
T x

[ 55 ]+1 ) ,10) [ 55 ]+1 ) ,10)

fot T [ 55 ] <1

And 0+300+ 0.25 P+ 0.05∗P∗ ämin ( ( K [ ( 55 ] +1 ) ,10 )

−1 )+50∗9 — P∗ä min ( ( K [55 ] +1 ) , 10 )
fot T [ 55] > 10

( ii ) EPV of premium=P∗ä[55 ]: 1 0∨¿=8.219 P ¿

EPV of benefit=110000∗A[ 55 ] : 1 0∨¿ .−10000∗(IA )
1 1
( [55 ] :10 ] ¿

(
¿ 110000∗ A [ 55] −
D 65
D [ 55] )
∗A65 −10000∗¿

(
¿ 110000∗ 0.38879−
68923
1104.05 )
∗0.52786 −10000∗¿

¿ 2863.64

EPV of expenses =300+0.25∗P+0.05∗P∗¿