2020 - LC2 Exam - Exam+Sol
Uploaded by
david Abotsitse2020 - LC2 Exam - Exam+Sol
Uploaded by
david AbotsitseHEC Lausanne
Solutions
Life Contingencies II
Winter / 2020
Prof. F. Dufresne
10 points per problem
1) a) 1 b) 3 c) 6
2) 10
3) 10
4) 10
5) 10
6) 10
7) 10
8) 10
1
HEC Lausanne
Table of
Financial Mathematics Functions
i i
i i (12) d d (12) d a (12 ) b (12 )
i (12)
d
0.020 0.01982 0.01980 0.01979 0.01961 1.00913 1.00997 1.00003 0.46164
0.025 0.02472 0.02469 0.02467 0.02439 1.01141 1.01245 1.00005 0.46245
0.030 0.02960 0.02956 0.02952 0.02913 1.01368 1.01493 1.00007 0.46326
0.035 0.03445 0.03440 0.03435 0.03382 1.01594 1.01740 1.00010 0.46407
0.040 0.03928 0.03922 0.03916 0.03846 1.01820 1.01987 1.00013 0.46489
0.045 0.04410 0.04402 0.04394 0.04306 1.02046 1.02233 1.00016 0.46570
0.050 0.04889 0.04879 0.04869 0.04762 1.02271 1.02480 1.00020 0.46651
0.055 0.05366 0.05354 0.05342 0.05213 1.02496 1.02725 1.00024 0.46731
0.060 0.05841 0.05827 0.05813 0.05660 1.02721 1.02971 1.00028 0.46812
0.065 0.06314 0.06297 0.06281 0.06103 1.02945 1.03216 1.00033 0.46892
0.070 0.06785 0.06766 0.06747 0.06542 1.03169 1.03461 1.00038 0.46972
0.075 0.07254 0.07232 0.07210 0.06977 1.03393 1.03705 1.00043 0.47052
0.080 0.07721 0.07696 0.07671 0.07407 1.03616 1.03949 1.00049 0.47132
2
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Problem 1
A 20-year decreasing life insurance is issued to (x). The annual benefit premium is 0.5131.
The effective rate of interest is 0.06. The rates of mortality are constant: qx +t = 0.04 , t = 0,1,2,
…
a) Calculate the terminal reserve at time 20.
b) Calculate the terminal reserve at time 19.
c) Given that the terminal reserve at time 10 is equal to -1.8341, calculate the terminal
reserve at time 8.
Solution:
3
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Problem 2
A special 20-year endowment insurance of 1000 is issued to a life aged 45. At the end of the
year of death, the benefit reserve is paid in addition to the standard death benefit of 1000. The
rate of interest i is 2% . The benefit premiums are not constant. They are given by
p h = p 0 ( h + 1)(1 + i ) , h = 0,1,2,…, 19.
h
The rates of mortality are given by q45+ j = .002 (1.02 ) , j = 0,1,2,… . Determine p 0 .
j
Solution:
4
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Problem 3
The future lifetime of newborns has a De Moivre distribution with parameter w = 100 . Future
lifetimes of newborns are mutually independent. The force of interest is zero.
Calculate a40:20 60
.
Solution:
5
HEC Lausanne
Problem 4
Show that, if a mortality table follows Makeham’s law,
1 1 - c y-x
A1 = Axy + axy × log s where log s = - A .
xy 1 + c y-x 1 + c y-x
(As usual, the parameters of the Makeham’s law are A, B, and c.)
Solution:
6
HEC Lausanne
Problem 5
For a double decrement model, you are given:
i) 0.4
(1)
q40 = 0.032
( )
2
ii) 0.6 q40 = 0.045
iii) Each decrement in the multiple decrement table is uniformly distributed
between integer ages.
(t )
Calculate p40 .
Solution:
7
HEC Lausanne
Problem 6
An insurer issues a special semi-continuous 5-year term insurance to (60).
The policy benefits are:
• 100’000 immediately on death from natural causes (Decrement 1).
• 200’000 immediately on death from other causes (Decrement 2).
Premiums of 7000 per year are payable annually.
You are given:
i) m61(1)+t = 0.05 0£t £4
ii) m61( 2)+t = 0.01 0£t £4
iii) δ = 0.02
Calculate the reserve at the end of the first year.
Solution:
8
HEC Lausanne
Problem 7
An insurer issues a 10-year term insurance policy with a sum insured of 1’000’000 to
(50).
You are given the following information:
(i) The sum insured is paid at the end of the month of death.
(ii) Premiums are payable monthly.
(iii) Initial expenses, payable at the start of the contract, are 60% of the
annualized premium.
(iv) Maintenance expenses are 5% of premiums including the first.
(v) Mortality follows the Standard Ultimate Life Table. [See last page of this
booklet]
(vi) Deaths are uniformly distributed between integer ages.
(vii) i = 0.05
(viii) Premiums are determined using the equivalence principle.
Calculate the monthly premium for this policy
Solution:
9
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Therefore,
10
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Problem 8
For a fully discrete whole life insurance of 1000 on (60), you are given:
ä60 = 11.146 ä61 = 10.903 ä70 = 8.569
i)
A60 = 0.3691 A61 = 0.3828 A70 = 0.5150
ii)
Calculate the difference between the net premium reserve and the full preliminary term
reserve at the end of the 10th year.
Solution:
11
