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 Long-Term Actuarial Math Old Exam MLC Forum

#1
07-20-2019, 12:35 PM
 isaiahbarrett27 CAS SOA Join Date: Dec 2017 Posts: 10 Blog Entries: 1

Hello all! First post here and hopefully can find some solace in the fact that LTAM is systematically ruining my life as it has many of yours. Be that as it may I'm still struggling with some earlier topics and need help.

I've been using CAs manual which has been good so far but very challenging. This was one of the first questions given:

For a fully discrete 5-payment whole life insurance of 1,000 on (40), you are given:

Expenses incurred at the beginning of the first five policy years are as follows:
Year 1 Year 2-5
Sales Commissions 20% 0 5% 0
Policy Maintenance 0% 10 0% 5
No expenses are incurred after Year 5.
Mortality follows the Standard Ultimate Life Table.
i=0.05
Calculate the gross premium using the equivalence principle.

To which [0.05G[aĻ40:5]+0.15G]+[5[aĻ40:5]+5] was given as the EPV of future expenses. Which to me makes no sense. Can anyone attest?
#2
07-20-2019, 12:53 PM
 Breadmaker Member SOA Join Date: May 2009 Studying for CPD - and nuttin' else! College: Swigmore U Favorite beer: Guinness Posts: 5,130

Commissions are 20% of FYP and 5% t/a, which is equivalent to 5% all years and an additional 15% at issue. That's your first term.

Policy maintenance is 10 at issue and 5 t/a, which is equivalent to 5 all years and an additional 5 at issue. That's your second term.

BTW, your annuity factor should be annuity due, not immediate annuity. NM: I see the little double dots next to the a!!
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Last edited by Breadmaker; 07-20-2019 at 12:55 PM.. Reason: Didn't see the double dots!