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  #1  
Old 04-30-2018, 01:46 AM
DonaldStewart DonaldStewart is offline
 
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Default Mortality Improvement : EA-1

I've had some trouble with mortality improvement. For instance, let's say the question says they use mortality improvement of 2% compounded annually. Then they give Q_x at different age x's.

1) Do we multiply the Q_x * .98, or divide by 1.02? I've seen different solutions use both methods. Sometimes it results in the same answer range, other times not.
2) Do we do it for the first year? Since the Q_x's are as of 1/1/2018 for instance, then there'd be no improvement for the 1st year I'd think, then 2nd year *.98, 3rd year *.98^2, and so on (or /1.02, /1.02^2 if that's the case).
3) Are the multiple choice answers ever outside of the implied range? Eg, if A:<24, B: 25-29, C:30-34, D: 35-39, E: >40 ....would the answer every be like 17, or even 47?

Thanks!
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  #2  
Old 04-30-2018, 08:31 AM
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PosterNutBag PosterNutBag is offline
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I have no experience with the EA-1 exam, but on both of the EA-2 exams if you are outside the implied answer ranges for choices A & E then you probably did something wrong.

Check out this thread. It's pretty clear from this thread that you would multiply the original q's by 0.98 for a 2% mortality improvement. It sounds like your problem is simplified, though, so that A & B in the first post of that thread would be the same for you since the improvement is 2% for each q regardless of age. Hopefully doing it this way puts you in the implied range.

Whether to do it or not for the first year depends on the precise wording of the question is my guess. If you are at time 0 at the start of the problem and time 2 at the end then you would just do 2 years of mortality improvement unless it tells you that the mortality improvement comes a year later or something like that.

You say that the q is as of 1/1/2018 so you don't think you should do the improvement for the first year? I don't know how the problem is worded, but how is your first q updated for the improvement and the rest are not (this doesn't sound right on the surface)? If 1/1/2018 is time 0 and the first q gets you from the age at 1/1/2018 to the age at 1/1/2019 then I would expect that this q needs to be updated with the mortality improvement (again depending on the exact wording in the problem). Just so we are on the same page, if the participant is Age 58 at 1/1/2018 then q58 would be the probability of death during 2018 (from 1/1/2018 (age 58) to 1/1/2019 (age 59)).

Last edited by PosterNutBag; 04-30-2018 at 08:41 AM..
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Old 04-30-2018, 08:57 AM
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Rick_G Rick_G is offline
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The correct approach is to multiply the qx values by (1-p%). For a little light reading, you can download older exams and solutions (for FREE) from my web site:
http://softwarepolish.com/actuarial/ea1Aexams.htm
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EA-2F and EA-2L and EA-1
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Old 04-30-2018, 12:57 PM
DonaldStewart DonaldStewart is offline
 
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Hi Rick,

I've actually been studying exclusively from your exams & solutions and they're working out great. Feeling good about tomorrow, so thanks!
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