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

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

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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You are given the following information about a person aged exactly x: = : 0.03, 9x+1 = 0.04, 9x+2 = 0.05 9x A Term Life Insurance contract with death benefit of 50,000 is set on this life, with a coverage period of n = 3 years. What is the Expected Present Value of the death benefit, if the annual effective interest rate is 8%? [As usual, a benefit is paid at the end of the year of death, if death occurs within the coverage period.] Select one: a. 5292.2 b. 5088.1 C. 6010.5 d. 4704.4 e. 4900.2
A death benefit on a life insurance policy can be paid in one of the following three ways: (i) A perpetuity of $250 at the end of each month (ii) $795.70 at the end of each month for n years (iii) One payment of $81,007 at the end of n years If each payment method produces the same present value for the death benefit, what is the present value of the death benefit? A. 48,300 B. 55,600 C. 61,900 D. 69,200 E. 78,500
An insurer needs to make the following annuity payments to an individual: £445 paid at the end of each month during the first 15 years and then £448 paid at the end of each 4 months for the following 8 years. Assuming an effective monthly interest rate of 1.3% throughout the entire period, how much total fund the insurer needs to hold today in order to meet these payments? ( correct answer =31470.44, using formulas no tables)
A life insurance company issues a whole life annuity immediate with annual payments. The annuity is issued to (65). The annuity pays 50,000 at the end of each year for the life of the annuitant with the first payment being made at age 66. You are given: A single premium is paid to purchase this annuity. Mortality follows the Illustrative Life Table with i = 0.06. Assume that the single net premium, P, is 110% of the expected present value at issue of benefits. Calculate the probability that this policy will generate a profit using P.
A 6-year term insurance policy has an annual premium of $200, and at the end of 6 years, all payments and interest are refunded. What lump-sum deposit is necessary to equal this amount if you assume an interest rate of 2.5% compounded annually? (a) State the type. O future value O ordinary annuity O present value of an annuity O amortization O sinking fund (b) Answer the question. (Round your answer to the nearest cent.) $
Someone needs to make the following annuity payments to an individual: £445 paid at the end of each month during the first 15 years and then £448 paid at the end of each 4 months for the following 8 years. Assuming an effective monthly interest rate of 1.3% throughout the entire period, how much total fund the insurer needs to hold today in order to meet these payments? correct answer = 31470.44, NO TABLES, ONLY FORMULAS, PLEASE
A 6-year term insurance policy has an annual premium of $500, and at the end of 6 years, all payments and interest are refunded. What lump-sum deposit is necessary to equal this amount if you assume an interest rate of 2.5% compounded annually? (a) State the type. A.future valueB. ordinary annuity C.sinking fundD. present value of an annuityE.amortization (b) Answer the question. (Round your answer to the nearest cent.)
A 3-year term insurance policy has an annual premium of $300, and at the end of 3 years, all payments and interest are refunded. What lump-sum deposit is necessary to equal this amount if you assume an interest rate of 4.5% compounded annually? (a) State the type. O sinking fund O present value of an annuity O amortization O future value O ordinary annuity (b) Answer the question. (Round your answer to the nearest cent.) $4 Need Help? Read It
A 3-year term insurance policy has an annual premium of $200, and at the end of 3 years, all payments and interest are refunded. What lump-sum deposit is necessary to equal this amount if you assume an interest rate of 3.5% compounded annually? (a) State the type. sinking fund present value of an annuity amortization ordinary annuity future value (b) Answer the question. (Round your answer to the nearest cent.) $
If the value of the annual payment is $34,059.92, calculate the present value of a life annuity payable to a 54-year-old woman, if the rate is 4.5% per year, considering from the mortality tables that N55 = 127,744 and if D54 = 8701.9
A 6-year term insurance policy has an annual premium of $500, and at the end of 6 years, all payments and interest are refunded. What lump-sum deposit is necessary to equal this amount if you assume an interest rate of 2.5% compounded annually? (a) State the type. future value present value of an annuity sinking fund amortization ordinary annuity (b) Answer the question. (Round your answer to the nearest cent.) $
What is the net single premium value to be paid by a person who will buy a life annuity at the beginning of a period of 10 years, with a 5-year deferral, 100 TL guarantee, arranged for the age of 30? (i = 0.03)

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