ACTL3002 Life Insurance and Superannuation Models

Tutorial 1 Questions - for Week 2

Prior to the tutorial attempt the following Exercises from the Dickson et al. exercises. Review your
solutions and check with the Solutions Manual.
Exercise 1.3
Exercise 1.7
Exercise 2.12
Exercise 3.2
Exercise 3.4
Exercise 4.3
Exercise 4.6
Exercise 4.12
Exercise 4.20
Review the following exercises for discussion at the tutorial. These will be also used for student presentations in tutorials.
1. Assume that deaths are uniformly distributed between integer ages.
(i) By considering a term insurance policy as a series of one year deferred term insurance policies, show
that:
i 1
1
= Ax:n
.
Ax:n

(ii) Calculate the expected present value and the variance of the present value of a term insurance of 1
payable immediately on death for a life aged 40 exact, if death occurs within 30 years. You are given
the following basis:
Interest:

4% per annum

Mortality:

AM92 Select

No expenses.
2. For a whole life insurance of 1000 on (x) with benefits payable at the moment of death, you are given:

0.04, 0 < t 10
t =
0.05, t > 10
and


x+t =

0.06, 0 < t 10
.
0.07, t > 10

Calculate the expected present value of this insurance.

3. For a whole life insurance of 1 on (41) with death benefit payable at the end of the year of death, let Z
be the present value random variable for this insurance. You are given: (i) i = 0.05; (ii) p40 = 0.9972;
(iii) A41 A40 = 0.00822; and (iv) 2 A41 2 A40 = 0.00433. Calculate Var(Z).
4. Each of 100 independent lives purchases a single premium 5-year deferred whole life insurance of
10 payable at the moment of death. Using the Normal approximation, calculate F such that the
probability the insurer has sufficient funds to pay all claims is 0.95. You are given:
1

 = 0.004;
= 0.006;
F is the aggregate amount the insurer receives from the 100 lives; and
the 95th percentile of the standard Normal distribution is 1.645.
1
, assuming the force of mortality is constant between consecutive
5. Calculate the exact value of A70:1
integer ages. You are given the following basis:

Mortality:
Interest:

ELT15 (Males)
7.5% per annum

- End of Tutorial Week 2 questions -