SUNWAY UNIVERSITY SUNWAY UNIVERSITY BUSINESS SCHOOL, FINAL EXAMINATION FOR BSC (HONS) IN ACTUARIAL STUDIES ACADEMIC SESSION : AUGUST 2016 SEMESTER SUBJECT + ASC2014 LIFE CONTINGENCIES | EXAMINATION : DECEMBER 2016 TIME ALLOWED + 3 HOURS + 10 MINUTES READING TIME INSTRUCTIONS TO CANDIDATES ‘There are FIVE (5) questions printed on SEVEN (7) pages excluding the cover page. ANSWER ALL QUESTIONS. All answers must be written in the answer booklets provided using blue or black INK (except for diagrams). At the end of the exam, answer booklets and answer sheets must be fastened together. IMPORTANT NOTES TO CANDIDATES Standard Items : Pen, Pencil, Ruler, Eraser or Correction Fluid Special Items : Non Programmable Calculators It is your responsibility to ensure that you do NOT have in your possession any unauthorized notes or any other means that would improperly help you in your work. if you have any unauthorized materials with you, hand it to the invigilator BEFORE reading any further. DO NOT REMOVE THIS QUESTION PAPER FROM THE EXAMINATION HALL‘Sunway University Business Schoo! ‘AS02014 / December 2016 Examination Question 1 (Total: 20 marks) @ ) © @ © Let 7 denote the continuous random variable with survival function S(¢) . Write down the three properties of S(/). (marks) Determine whether the function $(¢) = e~" qualifies to be a survival function. @B marks) Let e, denote the mean of the curtate future lifetime of (x). Prove that = Dis fa (@ marks) Under constant force of mortality, determine ¢, (B marks) ‘The force of mortality for a life is _ [002 15 "10.03 t>5 Calculate the mean of the complete future lifetime of (x) within the next n years. (8 marks) Page 1 of 7‘Sunway University Business Schoo! ‘A8C2014 / December 2016 Examination Question 2 (Total: 20 marks) t (@®) Given that 1,,,=(-01, +41, for 0S¢S1, prove that,q, =¢4, and ,4,,,= ce 34, where 0Ss+/S1. (6 marks) () Youre given © q,0.05, g,,, =0.10 * Deaths are uniformly distributed between integral ages Determine 4... (4 marks) © Prove that w:=,E, Arn. (4 marks) @ An insurance contract issued to a life aged 60 will pay RMSO at the moment of death if the insured dies before reaching age 70 and will pay RMIO if the insured dies after age 70. You are given 8 Hon = 0.02 t<10 0.03 1210 © 5,=0.05 Calculate the actuarial present value of this insurance contract, [Hint: Under constant force, aia = aaa etsnyy ut (6 marks) Page 2 of 7‘Sunway University Business School ASC2014 / December 2016 Examination Question 3 (otal: 20 marks) (2) Show that ai, 2,= y's Even G marks) (&) A 3-year term actuarial policy is issued to a life age x with bencfit of 1 payable at the © @ © end of year of death. You are given Calculate the variance of the present value of this insurance contract. (7 marks) Consider a special insurance on a life currently age 55 with face amount of 1000 with benefit payable at the end of the year of death if death occurs between ages 60 and 70, and 500 if death occurs after age 70. You are given ‘* Mortality follows the Illustrative Life Table 1 = 0.06 Calculate the actuarial present value of the insurance benefit. (5 marks) Write down a relationship between 4, and 4,,, in terms of 9, and q,,,. (2: marks) ‘You are given © v=090 © py=094, py =092 © A= 055 Calculate 4,.. (3 marks) Page 3 of 7‘Sunway University Business School ‘A8C2014// December 2016 Examination Question 4 (Total: 20 marks) @® ) © @ A continuous whole life annuity on a life age x makes payments at a rate of 100 per year. You are given + #=0.01 og nf0 88 0.04 t25 ‘Under constant force of mortality, calculate the actuarial present value of this annuity, (6 marks) You are given © yp = 008, gy, = 0.04 and guy = 0.05 . 05 Calculate dys (4 marks) Let ¥ be the present value random variable for a deferred 3-year temporary life annuity ‘on a life age 40 that pays 1 per year the beginning of each year with the first payment ‘made when the annuitant reaches age 50. You are given Peo = 0:90, Pep =0.88 and Py =0.85 © vy=0.90 Calculate Var{¥). (7 marks) A person aged x purchased a special whole life annuity immediate with payments of 15,12,9, and 6 in the first 4 years, followed by payments of 3 per year thereafter. You are given + 4,220.50, a), © Ua)g=14 474.86 Calculate the actuarial present value of the annuity, G marks) Page 4 of 7‘Sunway University Business Schoo! ‘ASC2014 | December 2016 Examination Question 5 (otal: 20 marks) (@) The Woolhouse’s three term approximation formula for the m-thly whole life annuity due is given by (0) gg Mol male a ma, FS, 48) In an attempt to estimate a{7? using the above formula, it was found that if) = 8.29340 and al!’ =8.16715 Caleulate ai? (6 marks) (®) By using the Woolhouse’s three term approximation formula, derive G marks) © A special fully discrete 3-year term insurance is issued to a life age x. You are given ‘+ Death benefits are RM1000, RM2000, RM3000 for the three years ‘+ Premiums of per year are payable at the beginning of the year ‘* Premiums are determined by the Equivalence Principle © 4, =0.05, 9,,)=0.10 and q,,,=0.15 + §=0.07 Calculate (to the nearest RM) the value of =. (5 marks) (@ Fora fully discrete 10-pay whole life insurance of 10,000 on a life age 45, you are given * Premiums are calculated based on the Equivalence Principle. © Ag 0.25, a.5,=7 and d = 0.05 Expenses are paid at the beginning of the year * Expenses on the policy are 50% of annual premium plus RM200 for Year 1 and 10% of annual premium plus RM20 for Years 2. onwards, Calculate (to the nearest hundred RM) the gross annual premium. (6 marks) ~END OF PAPER ~ Page 5 of 7‘Sunway University Business Schoo! ‘ASC2014 / December 2016 Examination Mustrative Life Table: Basic Functions and Single Benefit Premiums ati ~ 006 « te 100098 % — 1000Ax 0000s) 10005Ex 400086 1000506 5S Tymgge 7242 sem) geo asge 72854 sans e099 oO eyez == 08 Arasr9 «asso “gas faseg «Sagas i080 9 97 8 wee 72 oar ant gaan ne orm «OSL ere sass BS (3 651936528 4304s SSO? 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SBxIe XANY yssas x 8828 SESS SEBIR aRaae i 137330 201635 Tor 492 8803267 8518,155 8396600 8,185,663, 5900204 5,834)051 5,396,001 5507,152 4920;182 4530,260, 4225,163 3914355, 3600038 328452 2970496 260,734 2350.206 ‘ustrative Lite Table: Basic Functions and Single Boneft Premiums at = 0.06 08.12 45781 acac0 178 S879 were ete 665.45 exssT TST a 96362 10004» 454.50 46047 aa} 496.70 51495, Tao 48.74 7003 7mos2 281 204.00 ataz7 2401 pir 58.48 273.08 87870 2593 0176 29719 905.90 on 916.19 91882 oni 9515 e000») 24920 283 es 2146 306a2 ie 23788 G8 ‘37008 Beat 403.80 42102 502 4595 47359 49127 £0396 52550 5u15 55157 S730 5579 e281 sae 61456 const 87583 so Tous6 mast 713 74450 75580 768.13 7908 7044 7021 moat erm 2508 253 ma045 axs.at 51.60 557.04 Page 7 of 7 ‘ASC2014 / December 2016 Examination 10008E sta2r e086 e035 e030 60945 sor79 6525 sma 55743 ‘54207 ws 50835 4057 an57 8019 40886 40662 38857 35079 33540 31056 23544 26021 2asa1 21036 195821 18290 14069 1979 40043 278 7 a4 32 a9 1637 13 756 406 200 176 on 026, 1000106 e758 37436 ose S77 037 31427 2781 207 26231 aoa 7545 2671 ‘ere 6931 351.00 sae 11606 ‘98 450 7056 783 4650 3661 2ei7 2113 3541 1081 Tat 313 190 10 ost a5 ‘or 03 0.00 ‘100 0.00 ‘0.00 0.90 0002 arar 7138 era 5858 4988 4185 7195 2219 ER 1308 319 Beare x S¥axa azanz S898 Sees? seesR geese