March 14, 2023

FINN 372 Variant A (Actuarial Sciences & Insurance) Midterm

Total marks : _40__ Time Allowed : 75 minutes

Name _________________________ Roll No._______________

Section A.
Multiple Choice Questions
Encircle the correct answer
(Questions 1-7 are worth 1 marks each and questions 8-14 are worth 1 marks each)

Q1. A person buys an “n year non-participating” traditional life insurance product. Which of
the following products pays 100% of agreed Sum Assured after n years in case the person
survives the “n” year period.
I. Term Insurance
II. Pure Endowment
III. Endowment
IV. Anticipated Endowment
Answer options :
A. III only
B. IV only
C. I & II only
D. III & IV only
E. II & III only

Q2. Which of the following statement(s) is/are correct.

I. Pure Endowment product provides death protection for the term of the policy.
II. Anticipated Endowment product has the attraction of early payouts (in case of
survival).

Answer options :
A. None of the statements
B. Statement I only
C. Statement II only
D. Both the statements
III.
Q3. Which of the following statement(s) is/are correct about exclusions in a life insurance
policy.
I. Too many exclusions have a potential reputation risk for the insurer

II. In case the insured dies as a result of indulging in criminal activities, the exclusion
is generally limited to the first 2 years.

Answer options :
A. None of the statements
B. Statement I only
C. Statement II only
D. Both the statements

For questions 4-5, assume “i”, “m” & “n” are finite and >0; “n” & “m” are whole numbers and
“ï” has the same value on both sides of the equality or inequality.
An answer is True, if it holds for all value of “m”, “n” & “i”
Q4. Which of the following statement(s) is correct :

I. s̈ ❑ | > ä ❑ |
n n
II. ( Iä) ❑ | = ä ❑ | + v ä ❑ | + v2 ä ❑ | + v3
4 4 3 2

Answer options :

A. None of the statements

B. Statement I only
C. Statement II only
D. Both the statements

Q5. Which of the following statement(s) is true :

❑ ❑
I. ä n | < a∞ |
❑ ❑
II. m/a n | < m+1/a n |

Answer Choices :

A. None of the statements

B. Statement I only
C. Statement II only
D. Both the statements
For questions 6-7, assume “x” to be a finite whole number and >0. Assume same mortality
curve on both sides of the equality or inequality (wherever applicable). Also, assume positive
and increasing mortality with age.
A statement is True if it is true for all values of “x”.

Q6. Which of the following statement is true :

I. q
2/3 40 = P43 - P45

II. q < q40

2/4 40

Answer Options :

A. None of the statements

B. Statement I only
C. Statement II only
D. Both the statements

Q7. Which of the following statement is correct :

I. ex > Px + 2Px + Px ex+2

II. If we know P40, P41 and P42, we can find 2/2q40

Answer Choices :

A. None of the statements

B. Statement I only
C. Statement II only
D. Both the statements
Q8. You are given l40 = 1,000, l50 = 800, d49 = 50, d50 = 100, d51 = 200 and d52 = 300
Find 10/2q40
A. .30
B. .375
C. .50
D. .625
E. .65

Q9. A perpetuity due has annual payments of 100. Its present value (at time t – 0) is 1,000.
Find the applicable rate of interest (“ i ”) to the nearest 2nd decimal place.
A. 9.09%
B. 10.00%
C. 10.61%
D. 11.00%
E. 11.11%
 ❑
Q10. You are given e95 = 1.128, e96 = .6 and e97 = 0.2. Find e95: 2 | correct to 3 decimal places

A. 0.800
B. 0.964
C. 1.058
D. 1.300
E. 2.028

Q11. You are given the following information :

x lx
51 900
52 800
53 700

❑
q
2 53
Find the ratio ❑ (correct to 2 decimal places)
q
2/ 2 51

Answer Choices :

A. 0.78
B. 0.88
C. 1.14
D. 1.29
E. The answer cannot be determined from the information provided.

Q12. Given a bid price of 111 and the bid offer spread of 0.057, what is the offer price
(correct to 2 decimal places).

A. 105.01
B. 113.37
C. 117.33
D. 122.7
E. 125.63
Q13. An annuity has the following stream of payments :
I. 100 at the end of each year for years 1-5;
II. 200 at the end of each year for years 6-10;
III. 300 at the end of each year from end of year 11 to infinity.
Which of the following statements does not reflect the present value (at time t=o) of the above
stream of payments.
10
❑ ❑ v
A. 100 a 5 | + 200 v5 a 5 | + 300
i
11
❑ ❑ v
B. 200 a 10 | - 100a 5 | + 300
d
300 ❑ ❑
C. - 200a 5 | - 100v5 a 5 |
i
6 11
100 v v
D. + 100 + 100
i d d
5 10
❑ v v
E. 100 a 5 | + 200 + 100
i d

Q14. An annuity makes the following payments :

i. 200 at the end of each year for first “n-1” years (t = 1 to t = n-1)
ii. 300 at the end of nth year (t = n); and
iii. 500 at the end of each year for “m” yeas after “n” years (i.e. t = n + 1 to t= n + m)
You are given :
❑ ❑
a n | = 10, vn = .5, a m | = 8

Find the present value of the above annuity.

Answer options :
A. 4,050
B. 4,150
C. 5,000
D. 6,050
E. 6,150
Section B – Subjective Portion
Please show your working clearly and methodically.
Q1. (Worth 4 marks). You are given 3P53 = .95, 2P50 = .88, 2/q50 = .025 and 2/3q51 = .045
Calculate P50.
Q2. (Worth 4 marks). You have obtained the following information from a Life Insurance
Company for a Unit Linked Life Insurance Product.
i. Initial Policy Value NIL
ii. Annual Premium payable 1,000
iii. Percentage of Premium Charge 75% in year 1; 5% thereafter
iv. Relevant mortality rate 5 per thousand throughout
v. Surrender charge as % of Policy value 80% in Year 1; 5% in year 2, NIL
from year 3 onwards
vi. Sum Assured 25,000 (Level)
vii. Rate of return 5% each year

Assuming you surrender your policy at the end of 2nd year, what amount would you get (to the
nearest whole number).
Assume that all transactions of premium payments and deduction of expense charges and cost
of insurance occur at the beginning of the year.
Q3. You are given the following information :
x Px ex
50 0.98 11.76
51 0.96
52
53 10.25

Find i. e52 (worth 2 marks)

❑
ii. e50: 3 | (worth 2 marks)

Give your answers correct to 2 decimal places.

Q4. (Worth 4 marks). Scott makes the following 15 deposits in a Fund :
1 at the beginning of year 1;
2 at the beginning of year 2;
………………………….
………………………….

15 at the beginning of year 15.

At the end of 15th year, he withdraws the accumulated fund and uses it to buy a perpetuity
immediate of X. Calculate X correct to nearest whole number. Assume interest rate (“ i ”)
is 2.5%
Q5. (Worth 5 marks). Leo will make an initial deposit of 1,000 at t=0 followed by 5 annual
deposits of 200 at times t = 1,2,3,4 and 5. Leo will receive payments from the account at
times t = 7, 8 and 9 starting with 1,500 and decreasing by X each year. The balance in the
account after the last payment is NIL. The account earns an annual interest rate of 7%.
Determine X (rounded to nearest whole number).