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For a fully discrete whole life insurance of ¿1000 on (x), you are given: i The following expenses are incurred at the beginning of the year Year 1 Year 2+ 65% 9% 10 3 %of Premium Expense Other Miscellaneous Expenses ii An additional expense of ¿30 is paid when the death bene t is paid. iii i = 0.08 iv Ax =0.1743 v 2ax =5.630 Let L(G) be the prospective loss random variable when a premium of G is charged at the beginning of each policy year, as long as the policy is in force. (a) Calculate G using the equivalence principle. (b) Calculate the standard deviation of L(G).

For a fully discrete whole life insurance of ¿1000 on (x), you are given: i The following expenses are incurred at the beginning of the year Year 1 Year 2+ 65% 9% 10 3 %of Premium Expense Other Miscellaneous Expenses ii An additional expense of ¿30 is paid when the death bene t is paid. iii i = 0.08 iv Ax =0.1743 v 2ax =5.630 Let L(G) be the prospective loss random variable when a premium of G is charged at the beginning of each policy year, as long as the policy is in force. (a) Calculate G using the equivalence principle. (b) Calculate the standard deviation of L(G).

Corporate Fin Focused Approach
Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 1Q
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For a fully discrete whole life insurance of ¿1000 on (x), you are given: i The following expenses are incurred at the beginning of the year Year 1 Year 2+ 65% 9% 10 3 %of Premium Expense Other Miscellaneous Expenses ii An additional expense of ¿30 is paid when the death bene t is paid. iii i = 0.08 iv Ax =0.1743 v 2ax =5.630 Let L(G) be the prospective loss random variable when a premium of G is charged at the beginning of each policy year, as long as the policy is in force. (a) Calculate G using the equivalence principle. (b) Calculate the standard deviation of L(G).
Transcribed Image Text:For a fully discrete whole life insurance of ¿1000 on (x), you are given: i The following expenses are incurred at the beginning of the year Year 1 Year 2+ 65% 9% 10 3 %of Premium Expense Other Miscellaneous Expenses ii An additional expense of ¿30 is paid when the death bene t is paid. iii i = 0.08 iv Ax =0.1743 v 2ax =5.630 Let L(G) be the prospective loss random variable when a premium of G is charged at the beginning of each policy year, as long as the policy is in force. (a) Calculate G using the equivalence principle. (b) Calculate the standard deviation of L(G).
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