A ten-year term insurance is be issued to a life aged 50. The sum insured is $200,000 and payable immediately upon death. Premium payments are annual in advance. a) Using the SOA Standard Ultimate Life Table at i = 5% and UDD, compute the net annual premium determined by the equivalence principle. b) Find the probability that this contract makes a profit. c) Compute the gross premium determined by the equivalence principle if the initial expense is $500 plus 10% of the first premium, and if there is a renewal expense of 2% of the annual premium payment for the second and all subsequent premium payments.
A ten-year term insurance is be issued to a life aged 50. The sum insured is $200,000 and payable immediately upon death. Premium payments are annual in advance. a) Using the SOA Standard Ultimate Life Table at i = 5% and UDD, compute the net annual premium determined by the equivalence principle. b) Find the probability that this contract makes a profit. c) Compute the gross premium determined by the equivalence principle if the initial expense is $500 plus 10% of the first premium, and if there is a renewal expense of 2% of the annual premium payment for the second and all subsequent premium payments.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
A ten-year term insurance is be issued to a life aged 50. The sum insured is $200,000 and payable immediately upon death. Premium payments are annual in advance.
- a) Using the SOA Standard Ultimate Life Table at i = 5% and UDD, compute the net annual premium determined by the equivalence principle.
- b) Find the probability that this contract makes a profit.
- c) Compute the gross premium determined by the equivalence principle if the initial expense is $500 plus 10% of the first premium, and if there is a renewal expense of 2% of the annual premium payment for the second and all subsequent premium payments.

Transcribed Image Text:Standard Ultimate Life Table: Basic Functions and Single Net Premiums at i = 0.05
%3D
ä,
ä
A
x:10
ä
:201
„E,
10x
20 E,
x:201
x,
96,305.8
0.003792
14.6491
0.30243
0.11644
7.9379
0.62201
12.3024
0.41417
0.76493
0.57457
0.28641
61
61
0.004234
14.3861
0.31495
0.12506
7.9181
0.62295
12.2145
0.41836
0.76276
0.57003
0.27698
62
95,940.6
95,534.4
95,082.5
94,579.7
62
7.8960
0.62400
12.1174
0.42298
0.76033
0.56496
0.26674
63
0.004730
0.005288
63
14.1151
0.32785
0.13421
13.8363
0.34113
0.14392
7.8712
0.62518
12.0101
0.42809
0.75760
0.55932
0.25569
64
64
0.005915
13.5498
0.35477
0.15420
7.8435
0.62650
11.8920
0.43371.
0.75455
0.55305
0.24381
65
65
94,020.3
0.006619
13.2557
0.36878
0.16507
7.8126
0.62797
11.7622
0.43990
0.75114
0.54609
0.23112
66
66
0.007409
12.9542
0.38313
0.17654
7.7781
0.62961
11.6199
0.44667
0.74732
0.53836
0.21764
67
93,398.1
92,706.1
91,936.9
91,082.4
67
0.008297
12.6456
0.39783
0.18862
7.7396
0.63145
11.4643
0.45408
0.74305
0.52981
0.20343
68
68
0.009294
12.3302
0.41285
0.20133
7.6968
0.63349
11.2949
0.46215
0.73828
0.52036
0.18856
69
69
0.010413
12.0083
0.42818
0.21467
7.6491
0.63576
11.1109
0.47091
0.73295
0.50994
0.17313
70
70
90,134.0
0.011670
11.6803
0.44379
0.22864
7.5961
0.63828
10.9118
0.48039
0.72701
0.49848
0.15730
71
71
11.3468
0.45968
0.24324
7.5373
0.64108
10.6974
0.49060
0.72039
0.48590
0.14122
72
89,082.1
87,916.8
86,627.6
72
0.013081
0.014664
11.0081
0.47580
0.25847
7.4721
0.64419
10.4675
0.50155
0.71303
0.47215
0.12511
73
73
0.016440
10.6649
0.49215
0.27433
7.3999
0.64762
10.2221
0.51323
0.70483
0.45715
0.10918
74
74
85,203.5
0.018433
10.3178
0.50868
0.29079
7.3203
0.65142
9.9616
0.52564
0.69574
0.44085
0.09368
75
75
0.020668
9.9674
0.52536
0.30783
7.2325
0.65560
9.6866
0.53873
0.68566
0.42323
0.07887
76
76
83,632.9
9.6145
0.54217
0.32544
7.1360
0.66019
9.3980.
0.55247
0.67450
0.40427
0.06500
77
81,904.3
80,006.2
77,927.4
77
0.023175
0.025984
9.2598
0.55906
0.34359
7.0302
0.66523
9.0970
0.56681
0.66217
0.38396
0.05230
78
78
0.029132
8.9042
0.57599
0.36224
6.9146
0.67074
8.7850
0.58166
0.64859
"0.36235
0.04096
79
79
0.032658
8.5484
0.59293
0.38134
6.7885
0.67674
8.4639
0.59696
0.63365
0.33952
0.03113
80
80
75,657.2
8.1934
0.60984
0.40086
6.6517
0.68325
8.1354
0.61260
0.61727
0.31556
0.02286
81
73,186.3
70,507.2
67,614.6
81
0.036607
0.041025
7.8401
0.62666
0.42075
6.5037
0.69030
7.8018
0.62848
0.59936
0.29064
0.01616
82
82
0.045968
7.4893
0.64336
0.44094
6.3443
0.69789
7.4651
0.64452
0.57985
0.26498
0.01094
83
83
0.051493
7.1421
0.65990
0.46137
6.1735
0.70602
7.1275
0.66059
0.55868
0.23882
0.00706
84
84
64,506.5
6.7993
0.67622
0.48199
5.9915
0.71469
6.7910
0.67662
0.53581
0.21250
0.00431
85
85
61,184.9
0.057665
0.064554
6.4619
0.69229
0.50272
5.7986
0.72388
6.4574
0.69250
0.51122
0.18635
0.00248
86
86
57,656.7
0.072237
6.1308
0.70806
0.52349
5.5954
0.73355
6.1285
0.70817
0.48492
0.16079
0.00133
87
87
53,934.7
88
50,038.6
0.080798
5.8068
0.72349
0.54422
5.3828
0.74368
5.8057
0.72354
0.45697
0.13621
0.00066
88
5.4908
0.73853
0.56484
5.1620
0.75419
5.4903
0.73856
0.42748
0.11305
0.00030
89
45,995.6
41,841.1
89
0.090326
0.75317
0.58528
4.9346
0.76502
5.1833
0.75317
0.39659
0.09168
0.00012
90
90
0.100917
5.1835
0.112675
4.8858
0.76735
0.60545
4.7021
0.77609
4.8857
0.76735
0.36453
0.07244
0.00005
91
37,618.6
33,379.9
29,183.8
25,094.3
21,178.3
91
0.125708
4.5981
0.78104
0.62529
4.4665
0.78731
4.5981
0.78104
0.33158
0.05559
0.00002
92
92
0.140128
4.3213
0.79423
0.64472
4.2299
0.79858
4.3213
0.79423
0.29808
0.04128
0.00000
93
93
4.0556
0.80688
0.66368
3.9945
0.80979
4.0556
0.80688
0.26445
0.02955
0.00000
94
94
0.156052
3.8017
0.81897
0.68209
3.7624
0.82084
3.8017
0.81897
0.23116
0.02029
0.00000
95
95
0.173599
0.192887
3.5597
0.83049
0.69991
3.5356
0.83164
3.5597
0.83049
0.19872
1330
0.00000
96
17,501.8
14,125.9
11,102.5
96
0.214030
3.3300
0.84143
0.71708
3.3159
0.84210
3.3300
0.84143
0.16765
0.00827
0.00000
97
97
0.237134
3.1127
0.85177
0.73356
3.1050
0.85214
3.1127
0.85177
0.13850
0.00485
0.00000
98
98
0.262294
2.9079
0.86153
0.74930
2.9039
0.86172
2.9079
0.86153
0.11173
0.00266
0.00000
99
99
8,469.7
6,248.2
0.289584
2.7156
0.87068
0.76427
2.7137
0.87078
2.7156
0.87068
0.08777
0.00136
0.00000
100
100
心+

Transcribed Image Text:Standard Ultimate Life Table: Basic Functions and Single Net Premiums at i = 0.05
ä,
A,
24,
ä
x:10
A
*:10
ä
x:20
A
x:20
10E
20 E
x.
20
100,000.0
99,975.0
0.000250
19.9664
0.04922
0.00580
8.0991
0.61433
13.0559
0.37829
0.78252
0.61224
0.37440
20
21
0.000253
19.9197
0.05144
0.00614
8.0990
0.61433
13.0551
0.37833
0.78250
0.61220
0.37429
21
22
99,949.7
99,924.0
0.000257
19.8707
0.05378
0.00652
8.0988
0.61434
13.0541
0.37837
0.78248
0.61215
0.37417
22
23
0.000262
19.8193
0.05622
0.00694
8.0986
0.61435
13.0531
0.37842
0.78245
0.61210
0.37404
23
24
19.7655
99,897.8
99,871.1
0.000267
0.05879
0.00739
8.0983
0.61437
13.0519
0.37848
0.78243
0.61205
0.37390
24
25
0.000273
19.7090
0.06147
0.00788
8.0981
0.61438
13.0506
0.37854
0.78240
0.61198
0.37373
25
26
99,843.8
0.000280
19.6499
0.06429
0.00841
8.0978
0.61439
13.0491
0.37862
0.78236
0.61191
0.37354
26
27
99,815.9
0.000287
19.5878
0.06725
0.00900
8.0974
0.61441
13.0474
0.37869
0.78233
0.61183
0.37334
27
28
99,787.2
0.000296
19.5228
0.07034
0.00964
8.0970
0.61443
13.0455
0.37878
0.78229
0.61174
0.37310
28
29
99,757.7
0.000305
19.4547
0.07359
0.01033
8.0966
0.61445
13.0434
0.37888
0.78224
0.61163
0.37284
29
30
99,727.3
0.000315
19.3834
0.07698
0.01109
8.0961
0.61447
13.0410
0.37900
0.78219
0.61152
0.37254
30
31
99,695.8
0.000327
19.3086
0.08054
0.01192
8.0956
0.61450
13.0384
0.37913
0.78213
0.61139
0.37221
31
32
99,663.2
0.000341
19.2303
0.08427
0.01281
8.0949
0.61453
13.0354
0.37927
0.78206
0.61124
0.37183
32
33
99,629.3
0.000356
19.1484
0.08817
0.01379
8.0943
0.61456
13.0320
0.37943
0.78199
0.61108
0.37141
33
34
99,593.8
0.000372
19.0626
0.09226
0.01486
8.0935
0.61460
13.0282
0.37961
0.78190
0.61090
0.37094
34
35
99,556.7
0.000391
18.9728
0.09653
0.01601
8.0926
0.61464
13.0240
0.37981
0.78181
0.61069
0.37041
35
99,517.8
99,476.7
99,433.3
36
0.000412
18.8788
0.10101
0.01727
8.0916
0.61468
13.0192
.0.38004
0.78170
0.61046
0.36982
36
37
0.000436
18.7805
0.10569
0.01863
8.0905
0.61474
13.0138
0.38029
0.78158
0.61020
0.36915
37
38
0.000463
18.6777
0.11059
0.02012
8.0893
0.61480
13.0078
0.38058
0.78145
0.60990
0.36841
38
99,387.3
99,338.3
39
0.000493
18.5701
0.11571
0.02173
8.0879
0.61486
13.0011
0.38090
0.78130
0.60957
0.36757
39
40
0.000527
18.4578
0.12106
0.02347
8.0863
0.61494
12.9935
0.38126
0.78113
0.60920
0.36663
40
41
99,285.9
0.000565
18.3403
0.12665
0.02536
8.0846
0.61502
12.9850
0.38167
0.78094
0.60879
0.36558
41
42
99,229.8
0.000608
18.2176
0.13249
0.02741
8.0826
0.61511
12.9754
0.38212
0.78072
0.60832
0.36440
42
43
0.000656
99,169.4
99,104.3
18.0895
0.13859
0.02963
8.0804
0.61522
12.9647
0.38263
0.78048
0,60780
0.36307
43
44
0.000710
17.9558
0.14496
0.03203
8.0779
0.61534
12.9526
0.38321
0.78021
0.60721
0.36159
44
45
99,033.9
0.000771
17.8162
0.15161
0.03463
8.0751
0.61547
12.9391
0.38385
0.77991
0.60655
0.35994
45
46
17.6706
98,957.6
98,874.5
98,783.9
98,684.9
98,576.4
0.000839
0.15854
0.03744
8.0720
0.61562
12.9240
0.38457
0.77956
0.60581
0.35809
46
47
0.000916
17.5189
0.16577
0.04047
8.0684
0.61579
12.9070
0.38538
0.77918
0.60498
0.35601
47
48
0.001003
17.3607
0.17330
0.04374
8.0645
0.61598
12.8880
0.38629
0.77875
0.60404
0.35370
48
49
0.001100
17.1960
0.18114
0.04727
8.0600
0.61619
12.8667
0.35112
0.34824
0.38730
0.77827
0.60299
49
50
0.001209
17.0245
0.18931
0.05108
8.0550
0.61643
12.8428
0.38844
0.77772
0.60182
50
98,457.2
98,326.2
51
0.001331
16.8461
0.19780
0.05517
8.0494
0.61670
12.8161
0.38971
0.77711
0.60050
0.34503
51
52
0.001469
16.6606
0.20664
0.05957
8.0431
0.61700
12.7862
0.39113
0.77643
0.59902
0.34146
52
53
98,181.8
0.001623
16.4678
0.21582
0.06430
8.0360
0.61733
12.7527
0.39273
0.77566
0.59736
0.33749
53
54
98,022.4
97,846.2
0.001797
16.2676
0.22535
0.06938
8.0281
0.61771
12.7154
0.39451
0.77479
0.59550
0.33308
54
55
0.001993
16.0599
0.23524
0.07483
8.0192
0.61813
12.6737
0.39649
0.77382
0.59342
0.32819
55
0.08067
97,651.2
97,435.2
97,195.6
96,929.6
96,634.1
56
0.002212-
15.8444
0.24550
8.0092
0.61861
12.6271
0.39871
0.77273
0.59109
0.32279
56
57
0.002459
15.6212
0.25613
0.08692
7.9980
0.61914
12.5752
0.40118
0.77151
0.58848
0.31681
57
58
0.002736
15.3901
0.26714
0.09360
7.9854
0.61974
12.5174
0.40393
0.77014
0.58556
0.31024
58
59
0.003048
15.1511
0.27852
0.10073
7.9713
.0.62041
12.4531
0.40700
0.76860
0.58229
0.30300
59
60
0.003398
14.9041
0.29028
0.10834
7.9555
0.62116
12.3816
0.41040
0.76687
0.57864
0.29508
60
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