A life insurance company issues a whole life annuity immediate with annual payments. The annuity is issued to (65). The annuity pays 50,000 at the end of each year for the life of the annuitant with the first payment being made at age 66. You are given: A single premium is paid to purchase this annuity. Mortality follows the Illustrative Life Table with i = 0.06. Assume that the single net premium, P, is 110% of the expected present value at issue of benefits. Calculate the probability that this policy will generate a profit using P.

A life insurance company issues a whole life annuity immediate with annual payments. The annuity is issued to (65). The annuity pays 50,000 at the end of each year for the life of the annuitant with the first payment being made at age 66. You are given: A single premium is paid to purchase this annuity. Mortality follows the Illustrative Life Table with i = 0.06. Assume that the single net premium, P, is 110% of the expected present value at issue of benefits. Calculate the probability that this policy will generate a profit using P.

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

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

A life insurance company issues a whole life annuity immediate with annual payments. The
annuity is issued to (65). The annuity pays 50,000 at the end of each year for the life of the
annuitant with the first payment being made at age 66. You are given:
A single premium is paid to purchase this annuity.
Mortality follows the Illustrative Life Table with i = 0.06.
Assume that the single net premium, P, is 110% of the expected present value at issue of
benefits. Calculate the probability that this policy will generate a profit using P.

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refers to receiving a set monthly payment for the rest of your life. O Certain Period Annuity O Single Life Annuity O Joint & Survivor Annuity O Lump-sum Annuity
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