An survival model is given by the survival function S, (z) = e 0.0008 Suppose a whole life insurance policy with a benefit of $118250 payable immediately at the time of death of the insured life has a continuously compound interest rate 5 - 0.026. (a) What is the present value for the benefit if the policy is purchased at age 42? EPV = $ (b) What is the standard deviation of the present value of this insurance benefit if the policy is purchased at age 42? Note: Round your answer to two decimal places.
An survival model is given by the survival function S, (z) = e 0.0008 Suppose a whole life insurance policy with a benefit of $118250 payable immediately at the time of death of the insured life has a continuously compound interest rate 5 - 0.026. (a) What is the present value for the benefit if the policy is purchased at age 42? EPV = $ (b) What is the standard deviation of the present value of this insurance benefit if the policy is purchased at age 42? Note: Round your answer to two decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:An survival model is given by the survival function S₁(x) = e
Suppose a whole life insurance policy with a benefit of $118250 payable immediately at the time of death of the insured life has a continuously
compound interest rate 8 -0.026.
(a) What is the present value for the benefit if the policy is purchased at age 42?
EPV = $
a=
0.0008
(b) What is the standard deviation of the present value of this insurance benefit if the policy is purchased at age 42?
Note: Round your answer to two decimal places.
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