A select life aged 50 purchases a 10-year endowment insurance with $100,000 sum insured. Premiums are payable annually in advance and death benefits are payable at the end of the year of death. Assume that (i) commission is 12% of the first premium and 3% of each subsequent premium, (ii) other expenses are $60 at issue, and $6 at each subsequent premium date, (iii) mortality follows the Standard Select Life Table, and (iv) interest is 5% per year. Calculate the annual premium.

A select life aged 50 purchases a 10-year endowment insurance with $100,000 sum insured. Premiums are payable annually in advance and death benefits are payable at the end of the year of death. Assume that (i) commission is 12% of the first premium and 3% of each subsequent premium, (ii) other expenses are $60 at issue, and $6 at each subsequent premium date, (iii) mortality follows the Standard Select Life Table, and (iv) interest is 5% per year. Calculate the annual premium.

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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4. A select life aged 60 purchases a 10-year endowment insurance with $100,000 sum insured. Premiums are payable annually in advance and death benefits are payable at the end of the year of death. Assume that (i) commission is 10% of the first premium and 4% of cach subsequent premium, (ii) other expenses are $50 at issue, and $5 at each subsequent premium date, (iii) mortality follows the Standard Select Life Table, and (iv) interest is 5% per year. Calculate the annual premium.

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