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Long-Term Actuarial Math Old Exam MLC Forum

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Old 07-21-2019, 02:51 PM
LadyFingers LadyFingers is offline
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Default Calculating Actuarial Present Value for weird interest rate

I'm working a problem about a 25 year endowment insurance benefit with a 'bonus' attached to the insured value for each year survived. Assume lives follow SULT at 5%.

Insured amount is 250,000, bonus is 2.5%, compounded annually for each year survived.

The APV of the term insurance portion is calculated as
250,000 * 1/1.025 * term insurance formula at interest rate 1.05/1.025-1 = 2.439%

I'm not sure how to find this amount on an exam. I can't imagine that I would be expected to actually run through the summation for 25 years.

Is there a way to convert the life table to some other interest rate, that I don't know about?

Last edited by LadyFingers; 07-21-2019 at 03:01 PM..
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Old 07-21-2019, 02:58 PM
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Gandalf Gandalf is offline
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Does your source include a solution?

As I recall, a fair number of questions in the textbook assume readers have a spreadsheet with the mortality, so that they can do such calculations. That means that many of the textbook questions could not be used directly on the exam.
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Old 07-21-2019, 03:00 PM
LadyFingers LadyFingers is offline
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That's what I figured, I just wanted to be sure that I'm not missing something. I'm happy to just move past this. The solution just states the answer.
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Old 07-21-2019, 03:01 PM
LadyFingers LadyFingers is offline
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Quote:
Originally Posted by Gandalf View Post
Does your source include a solution?

As I recall, a fair number of questions in the textbook assume readers have a spreadsheet with the mortality, so that they can do such calculations. That means that many of the textbook questions could not be used directly on the exam.
And hey -- thanks!
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