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  #11  
Old 02-23-2014, 10:02 PM
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.5=(60-m)/60, m=30. I think the answer is zero. If someone dies in 30 years with a 20 year term insurance the present value of the random variable is 0. What's the answer?
If I knew the answer I wouldn't post the question here lol

you go to ASM for MLC 13th edition page 277 Exercise 13.14,

change the "20 year endowment insurance" to "20 year term insurance"

and try to solve it.

also again, M here is the Median of the present value of Z which is V^Tx, not the time Tx

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Old 02-23-2014, 10:13 PM
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Yes, the answer is 0, as I've strongly implied since post 4. More than 50% of the people collect 0 so the median is 0. This was not a hard question if you focused on what median means.
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Old 02-23-2014, 10:44 PM
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Thanks Gandalf. These continuous ones seem easy to me, the descrete ones I always mess up! What a noob, it helps if you just break the question into two parts. You can just set the survival function equal to .5 and solve for t. (60-t)/60 The reason you do this is because you're trying to find the value of v^t where there is a 50% chance of getting a value lower than this. You know that the pv of an insurance payment is monotomically decreasing as time increases, so just find the time that the survival function is .5 Once you've identify what an increasing time value is doing to the present value of your random variable then just forget about the v^t part untill you've already solved for t in the survival function. Think of them seperately. With percentiles first work out the probability part, find a time, then go back to the present value part with the value you got from the probability function. At least that's what I do.
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Old 02-23-2014, 11:04 PM
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That's absolutely an awesome explanation!!!

Thank you all
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Old 02-23-2014, 11:29 PM
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Old 02-24-2014, 06:44 PM
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