Concept explainers
Life Insurance Exercises 59–64 are based on the following table, which shows the average life expectancies in several countries.21 Assume that all premiums you calculate are based on end-of-month deposits in a fund yielding 4.8% annual interest compounded monthly to be paid out when a person reaches the life expectancy. [hinT: See Example 2.]
Country | Japan | Canada | U.K. | U.S. | Mexico | China | India |
Life Expectancy: Male | 80 | 80 | 79 | 76 | 73 | 74 | 64 |
Life Expectancy: Female | 87 | 84 | 83 | 81 | 79 | 77 | 68 |
Joaquín Lopez purchased a $750,000 life insurance policy in Mexico when he began work at the age of 22 years. At age 30 he was transferred to Toronto, where his insurance company lowered the rate of his policy to reflect the greater life expectancy in Canada. How much lower were his monthly premiums in Canada? [hinT: See the formula in the “Before we go on” discussion after Example 1.]
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