Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Use the following table to calculate the minimum premium an insurance company should
charge for a USD 5 million three-year term life insurance contract issued to a man aged 60.
Assume that the premium is paid at the beginning of each year and death always takes place
halfway through a year. The risk-free interest rate is 6% per annum (with semiannual
compounding).
Age
60
61
62
Probability of death
within one year
0.011407
0.012315
0.013289
Survival probability
0.85227
0.84254
0.83217
Life expectancy
(years)
20.92
20.16
19.40
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Transcribed Image Text:Use the following table to calculate the minimum premium an insurance company should charge for a USD 5 million three-year term life insurance contract issued to a man aged 60. Assume that the premium is paid at the beginning of each year and death always takes place halfway through a year. The risk-free interest rate is 6% per annum (with semiannual compounding). Age 60 61 62 Probability of death within one year 0.011407 0.012315 0.013289 Survival probability 0.85227 0.84254 0.83217 Life expectancy (years) 20.92 20.16 19.40
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