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1 MATH 3630 Actuarial Mathematics I Final Examination - sec 001 Monday, 10 December 2012 Time Allowed: 2 hours (6:00-8:00 pm) Room: MSB 411 Total Marks: 120 points Please write your name and student number at the spaces provided: Name: Student ID: There are twelve (12) writtenanswer questions here and you are to answer all twelve. Each question is worth 10 points. Your final mark will be divided by 120 to convert to a unit of 100%. Please provide details of your workings in the appropriate spaces provided; partial points will be granted. Please write legibly. Anyone caught writing after time has expired will be given a mark of zero. Good luck. Have a Happy and Healthy Christmas and New Year! Question Worth Score Total 120 % 120

2 Question No. 1: You are given: Mortality follows Gompertz law, µ x = Bc x, with B = and c = δ = 5% ä 50 = ä 65 = 7.55 Evaluate ä (4) value. 50: 15 based on Woolhouse s approximation with three terms and interpret this 2

3 Question No. 2: For a special whole life insurance policy issued to (45), you are given: Death benefits are payable at the end of the year of death while level premiums are payable once a year. The amount of benefit is \$200,000 if death occurs within the first 20 years and reduces to \$100,000 for death thereafter. Mortality follows the Illustrative Life Table. i = 6% Calculate the annual benefit premium based on the actuarial equivalence principle. 3

4 Question No. 3: For a fully discrete whole life insurance policy of \$1,000 on (x), you are given: The annual benefit premium is P = P + 2, where P is the annual benefit premium determined according to the equivalence principle. i = 0.10 A x = Ax = 0.3 Calculate the variance of the loss-at-issue. 4

5 Question No. 4: For a whole life annuity on (x) with benefits continuously paid at the rate of \$12,000 per year, you are given: { 0.01, 0 < t 10 δ t = 0.04, t > 10 and µ x+t = { 0.005, 0 < t , t > 5 Calculate the actuarial present value for this annuity. 5

6 Question No. 5: For a special two-year term life insurance policy issued to (40), you are given: Benefit of \$10,000 is payable at the moment of death. Premiums are payable semi-annual. The following is an extract from the mortality table: x l x Mortality follows a constant force assumption over each year of age. i (2) = 0.06 [Note: The corresponding force of interest is δ = ] Premiums are based on the actuarial equivalence principle. Calculate the amount of the semi-annual premium for this policy. 6

8 Question No. 6: For a fully discrete whole life insurance of \$1 issued to (x), you are given: L 0 is the net loss-at-issue random variable with the premium determined according to the actuarial equivalence principle. L 0 is the net loss-at-issue random variable with the premium determined such that E [ L 0] = 0.5. Var [ L 0 ] = Calculate Var [ L 0]. 8

9 Question No. 7: Get-a-Life Insurance Company issues a special 10-year endowment insurance policy to a person now age 45. You are given: Premiums are payable once a year, where the first year premium is P and the subsequent premiums are each year equal to half of the first year. If death occurs within the first 10 years, the amount of benefit is \$1,000,000 plus the difference between the first and second year premiums. An endowment equal to the first year premium is paid at the end of 10 years. Mortality follows the Standard Ultimate Survival Model with i = 5%. Calculate P. 9

10 Question No. 8: For a cohort of individuals all age x consisting of non-smokers (ns) and smokers (sm), you are given: Mortality is based on the following: k q ns x+k q sm x+k i = 5% A 1 x: 2 = for a randomly chosen individual from this cohort Determine the proportion of non-smokers and smokers in this cohort at age x. 10

11 Question No. 9: For a special 3-year temporary life annuity on (65), you are given: The annuity payments are \$20, \$30, and \$50, respectively, payable at the beginning of each year while (65) is alive. No further payments made after 3 years. Mortality is based on the following extract from a life table: i = 4% x l x Y is the present value random variable for this annuity. Calculate Var[Y]. 11

12 Question No. 10: Christian is currently age 45 who purchases a special deferred whole life annuity-due policy which will pay him the following benefits: guaranteed annual payments of B for 5 years, with the first payment to start when he reaches age 65; and annual payments of \$100,000, if alive, thereafter. You are given: Mortality follows the Illustrative Life Table. i = 6% The actuarial present value of Christian s life annuity benefits is \$225,000. Calculate B. 12

13 Question No. 11: For a fully discrete whole life insurance of \$1 on (50), you are given: Mortality follows the Illustrative Life Table. i = 6% The annual benefit premium is equal to Calculate the probability of a positive loss-at-issue. 13

14 Question No. 12: Suppose you are given: e x = 30.0 e x+1 = 30.6 e x+2 = 32.9 Calculate the probability that (x) will survive the next year but dies the following year. 14

15 EXTRA PAGE FOR ADDITIONAL OR SCRATCH WORK 15

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