A fully discrete 30-year endowment insurance policy of 400,000 is sold to Jenna who is 50 years old. The endowment policy contains an option where the endowment benefit at the end of 30 years can be taken as a whole life annuity due, with a 10-year guarantee, payable monthly from age 80, based on the same pricing assumptions as for the endowment insurance. You are given that: The actuarial present value of the monthly payments at age 80 is equal to the amount of the endowment. Monthly annuities are calculated using the two-term Woolhouse formula. Mortality follows the Standard Ultimate Life Table with i = 0.05. - - - Calculate the amount of the monthly payment.
A fully discrete 30-year endowment insurance policy of 400,000 is sold to Jenna who is 50 years old. The endowment policy contains an option where the endowment benefit at the end of 30 years can be taken as a whole life annuity due, with a 10-year guarantee, payable monthly from age 80, based on the same pricing assumptions as for the endowment insurance. You are given that: The actuarial present value of the monthly payments at age 80 is equal to the amount of the endowment. Monthly annuities are calculated using the two-term Woolhouse formula. Mortality follows the Standard Ultimate Life Table with i = 0.05. - - - Calculate the amount of the monthly payment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:Q5.
A fully discrete 30-year endowment insurance policy of 400,000 is sold to
Jenna who is 50 years old. The endowment policy contains an option where the
endowment benefit at the end of 30 years can be taken as a whole life annuity due,
with a 10-year guarantee, payable monthly from age 80, based on the same pricing
assumptions as for the endowment insurance. You are given that:
- The actuarial present value of the monthly payments at age 80 is equal to the
amount of the endowment.
Monthly annuities are calculated using the two-term Woolhouse formula.
Mortality follows the Standard Ultimate Life Table with i = 0.05.
Calculate the amount of the monthly payment.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Overview
VIEWStep 2: Calculate the actuarial present value of the endowment insurance policy
VIEWStep 3: Determine the number of months from age 80 to the end of the 10-year guarantee period
VIEWStep 4: Use the Woolhouse formula to calculate the monthly payment for the annuity due
VIEWSolution
VIEW
Step by step
Solved in 5 steps with 17 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education