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ActEd - CM1 CMP 2019 ch 15

1) The mortality of a certain population is governed by the life table function 𝑙𝑥 = 100 − 𝑥, 0 ≤ 𝑥 ≤ 100.
Calculate the values of the following expressions:
i) 𝑃(𝑇30 < 20)
ii) 𝑃(𝐾30 = 20)

2) A population is subject to a constant force of mortality of 0.015 pa. Calculate:

i) the probability that a life aged exactly 20 dies before age 21.25.
ii) the probability that a life aged exactly 22.5 dies between the ages of 25 and 27

3)
i) Calculate the value of 0.5𝑝55.5 using 𝑙55 = 94532, 𝑙56 = 94082 mortality and linear interpolation,
based on the assumption of a uniform distribution of deaths between integer ages.
ii) Calculate 1𝑝62.5 based on 𝑞62 = 0.002885, 𝑞63 = 0.004681 mortality using the assumption of
constant force of mortality.

4) Suppose that in a particular life table: 𝑙𝑥 = 100 − 𝑥, 0 ≤ 𝑥 ≤ 100

Calculate the curtate expected future lifetime of a newborn life.

5) The mortality of a certain population is governed by the life table function 𝑙𝑥 = 100 − 𝑥, 0 ≤ 𝑥 ≤ 100.
Calculate the values of the following expressions:
iii) 10| 2𝑞30
iv) 𝜇30

6) In a certain population, the force of mortality equals 0.025 at all ages.

Calculate:
(i) the probability that a new-born baby will survive to age 5
(ii) the probability that a life aged exactly 10 will die before age 12
(iii) the probability that a life aged exactly 5 will die between ages 10 and 12.

7) State whether each of the following functions could be used as a function to represent the number of lives
aged x (over the specified range of ages) in a hypothetical population (not necessarily human)?
i) 𝑙𝑥 = (1 + 𝑥/3)−3 (𝑥 ≥ 0)
ii) 𝑙𝑥 = − log(𝑥/100) (0 ≤ 𝑥 ≤ 100)

iii) 𝑙𝑥 = 𝑥 −0.5 (𝑥 ≥ 20)

8) Calculate 0.7𝑞45.2 using Constant Force of Mortality and Uniform Distribution of Death where 𝑞45 =
0.00123, 𝑞46 = 0.00134

9) A population is subject to a constant force of mortality of 0.025. Calculate:

iii) the probability that a life aged exactly 30 dies before age 31.25.
iv) the probability that a life aged exactly 32.5 dies between the ages of 35 and 37

10) Given that 𝑝80 = 0.988 , calculate 0.75𝑝80 assuming:

i) a uniform distribution of deaths between integer ages
ii) a constant force of mortality between integer ages.

11) The following figure shows the density 𝑓0 (𝑡) = 𝑡𝑝0 𝜇𝑡 for a mortality table

Write down the typical features of a life table based on human mortality, in reference to this graph.

12) Write down the expression for 𝑃(𝐾𝑥 = 𝑘), 𝑃(𝐾𝑥 < 𝑘), 𝑃(𝐾 ≥ 𝑘), 𝑃(𝑇𝑥 < 𝑡), 𝑃(𝑇𝑥 ≥ 𝑡) in terms of 𝑘𝑝𝑥 , 𝑘𝑞𝑥
and 𝜇𝑥

13)
 i) Using 𝑙37 = 96933, 𝑙65 = 79293, 𝑙75 = 53266, calculate the probability of a 37-year old dying
between age 65 and age 75.
ii) Assuming that the force of mortality increases with both age and policy duration, comment on the
expected relationship between 𝜇[𝑥+1] and 𝜇[𝑥]+1

14) Calculate 2.7𝑞45.2 using Constant Force of Mortality and Uniform Distribution of Death where 𝑞45 =
0.00123, 𝑞46 = 0.00134, 𝑞47 = 0.00145, 𝑞48 = 0.00156

15) For the given mortalities, find the following [5]

Age 0 1 2 3 4 5
𝑞𝑥 0.00814 0.00062 0.00038 0.0003 0.00024 0.00022

i) 𝑝2
ii) 2𝑝3
iii) 4𝑞1
iv) 𝑃(𝐾2 = 2)
v) 𝑃(𝐾1 < 3)

16) Calculate 0.75𝑝62.5 using [5]

i) The UDD assumption
ii) The CFM assumption
Use the information given below
(𝑙61 = 90971, 𝑙62 = 90132, 𝑙63 = 89217, 𝑙64 = 88210, 𝑙65 = 87093)

17) Given that 𝑝80 = 0.988 , calculate 0.5𝑝80 assuming:

iii) a uniform distribution of deaths between integer ages
iv) a constant force of mortality between integer ages.

18) The table below is part of a mortality table used by a life insurance company to calculate probabilities for a
special type of life insurance policy.
𝑥 𝑙[𝑥] 𝑙[𝑥]+1 𝑙[𝑥]+2 𝑙[𝑥]+3 𝑙𝑥+4
51 1537 1517 1502 1492 1483
52 1532 1512 1497 1487 1477
53 1525 1505 1490 1480 1470
54 1517 1499 1484 1474 1462
55 1512 1492 1477 1467 1453
 (i) Calculate the probability that a policyholder who was accepted for insurance exactly 2 years ago and
is now aged exactly 55 will die between age 56 and age 57.

19) Calculate 1.7𝑞45.2 using Constant Force of Mortality and Uniform Distribution of Death where 𝑞45 =
0.00123, 𝑞46 = 0.00134, 𝑞47 = 0.00145
CT5-PC-15 ch 14
1) The following figure shows 𝑞𝑥 on a vertical base 10 logarithmic scale.

Write down the main features of mortality rate based on this graph.

2)
i) Why would you expect mortality rates to decrease over time and when would this not be the case?
ii) How would you expect the mortality rates for judges and divers to compare?

3) What problem must you be careful to avoid before you can make the claim that a small
intake of alcohol is good for you?

4) List down the types of selection in mortality

5) List four factors that could adversely affect the mortality of a homeless person in a developed country.

6) List 5 different classes of lives included in pension fund

7) The following table gives a summary of mortality for one of the occupational groups and for the country as a
whole.

Occupation A Whole country

Age Group Exposed to risk Deaths Exposed to risk Deaths
20-34 15000 52 960000 3100
35-49 12000 74 1400000 7500
50-64 10000 109 740000 7100
Total 37000 235 3100000 17700
Calculate the crude death rate, the standardised mortality rate and the standardised mortality ratio for
Occupation A.

8) Give 3 examples of class selection

9) You are given the following data from two populations:

Madeup Town Standard Population

Sex Occupation Population Deaths Population Deaths
Male Office worker 20000 100 10000 50
Manual worker 60000 500 20000 300
Other 20000 250 20000 500
Female Office worker 20000 50 10000 50
Manual worker 30000 200 10000 100
Other 50000 900 30000 500
Total 200000 2000 100000 1500
Calculate the directly standardised mortality rate for Madeuptown, standardising by occupation.

10) i) What does a value of 𝐹 (Area Compatibility Factor) less than/greater than 1 indicate?
ii) Write a brief note about “Adverse Selection”.

11) Criticise the following statements from the viewpoint of how selection might affect the assumed reality:

i) “There were 1 million reported crimes in 1980 and 2 million in 1990. So the numbers of minor and
serious crimes committed have doubled over the last decade.”
ii) “1% of the HIV tests carried out in a London clinic proved positive. So there are 500,000 HIV
positive people in this country.”
iii) “People who take out life assurance policies experience higher mortality rates than the general
population because they believe they are likely to die sooner than other people.”

12) Discuss the suitability of the crude death rate, the standardised mortality rate and the standardised mortality
ratio for comparing:
i) the mortality, at different times, of the population of a given country
ii) the mortality, at a certain time, of two different occupational groups in the same population

13)
i) What is the risk to a life company of using one mortality table for all classes of lives together?
 ii) What is the problem with producing tables for different classes of lives?

14) Calculate the area comparability factor for Oldsville.

Oldsville Standard Population
Age Population Deaths Population Deaths
20 10000 15 40000 80
40 20000 60 35000 140
60 70000 525 25000 200
Total 100000 600 100000 420

15) Classify the possible sources of selection that might influence risk levels in the following select groups in
the contexts indicated:
i) an option on a term assurance policy to extend the period of cover without requiring a medical
examination (life insurance),
ii) a mortality study based on people earning over £50,000 per annum (life insurance),
iii) a mortality study based on doctors (population mortality),
iv) people being interviewed in the street (market research).

16) Calculate the area comparability factor for Youngsville.

Youngsville Standard Population
Age Population Deaths Population Deaths
20 70000 210 40000 80
40 20000 90 35000 140
60 10000 100 25000 200
Total 100000 400 100000 420
ActEd - CM1 CMP 2019 ch 2
1) List the advantages and disadvantages of modelling process

2) What are the key steps in a modelling process. (write any 5)

3) Explain what is meant by a ‘stochastic model’ and state two advantages these have over deterministic
models.

4) In assessing the suitability of a model for a particular exercise what are the important points to consider.
(write any 5)

5) List the advantages and disadvantages of using models in actuarial work.

6) A new town is planned in a currently rural area. A model is to be developed to recommend the number and
size of schools required in the new town. The proposed modelling approach is as follows:
• The current age distribution of the population in the area is multiplied by the planned population of the
new town to produce an initial population distribution.
• Current national fertility and mortality rates by age are used to estimate births and deaths.
• The births and deaths are applied to the initial population distribution to generate a projected distribution
of the town’s population by age for each future year, and hence the number of school age children.
Discuss the appropriateness of the proposed modelling approach.

7) An investor has bought shares worth £5,000 and wants to estimate how much they will be worth in a year’s
time. Describe both a deterministic and stochastic model based on an expected growth rate of 7% over the year.

8)
i) Why are models used?
ii) Describe the role of simulation in sensitivity analysis.

9) The government of a small island state intends to set up a model to analyse the mortality of the island’s
population over the past 50 years. Describe the process that would be followed to carry out the analysis.
CS2 CMP 2019 ch1
1) You run a business that sells and provides service for a range of expensive sports cars. Each car sells for
between £40,000 and £50,000 (cash only) and you sell about 10 to 20 each year. The ‘life blood’ of the business
is the regular servicing and maintenance of the cars you have sold previously.
Describe the characteristics of a stochastic process that might be a suitable model for the balance on your
company’s bank account.

2) Consider a process defined by the equation: 𝑋0 = 100

𝑋𝑡 = 𝑋𝑡−1 + 𝑍𝑡 , 𝑡 = 1,2,3, …
Where for 𝑡 = 0,1,2 …
+1 with probability 𝑝
𝑍𝑡 = {
−1 with probability 1 − 𝑝
Calculate
i) 𝑃(𝑋2 = 100, 𝑋4 = 103|𝑋0 = 100)
ii) 𝑃(𝑋2 = 100, 𝑋4 = 102|𝑋0 = 100)

3) In the context of a stochastic process denoted by {𝑋𝑡 : 𝑡 ∈ 𝐽} , define the terms:

i) state space
ii) time set
iii) sample path.

4) Consider a process defined by the equation: 𝑋0 = 100

𝑋𝑡 = 𝑋𝑡−1 + 𝑍𝑡 , 𝑡 = 1,2,3, …
Where for 𝑡 = 0,1,2 …
+1 with probability 𝑝
𝑍𝑡 = {
−1 with probability 1 − 𝑝
Calculate
iii) 𝑃(𝑋3 = 101, 𝑋5 = 103|𝑋0 = 100)
iv) 𝑃(𝑋1 = 101, 𝑋4 = 102|𝑋0 = 100)

5) For a stochastic process 𝑋𝑛 with time set 𝐽 and state space 𝑆 , define the terms:
i) increment
ii) Markov property.

6)
 i) 𝑋𝑛 is a stochastic process with a discrete state space and a discrete time set. Show that if non-
overlapping increments of this process are independent, then the process satisfies the Markov
property.
ii) Show that a white noise process in discrete time with a discrete state space does not have
independent increments, but is a Markov process.

7) Define Strict Stationary process

8) Show that:
𝑐𝑜𝑣(𝑎𝑋 + 𝑏𝑌, 𝑐𝑊 + 𝑑) = 𝑎𝑐 × 𝑐𝑜𝑣(𝑊, 𝑋) + 𝑐𝑏 × 𝑐𝑜𝑣(𝑊, 𝑌)
by using the properties of the covariance function

9) Define a simple symmetric random walk and identify its time set and state space

10) Calculate the covariance between the values 𝑋(𝑡) and 𝑋(𝑡 + 𝑠) taken by a Poisson process 𝑋(𝑡)with
constant rate 𝜆 at the two times 𝑡 and 𝑡 + 𝑠 , where 𝑠 > 0.

11) For a stochastic process 𝑋𝑛 with time set 𝐽 and state space 𝑆 , define the terms:
iii) Stationary
iv) weakly stationary

12) Stochastic process models can be placed in one of four categories according to whether the state space is
continuous or discrete, and whether the time set is continuous or discrete. For each of the four categories:

i) state a stochastic process model of that type

ii) give an example of a problem an actuary may wish to study using a model from that category.