Decompose the premium payable into the risk portion

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Reference no: EM131001004

For a certain contract issued at age 60, 5V = 200, the premium payable at age 65 is 40, q₆₅ = 0.20, the death benefit payable at age 66 for death between age 65 and 66 is 800, the interest rate for the sixth year of the contract (between age 65 and 66) is 20%.

(a) Find 6V.

(b) Decompose the premium payable at age 65 into the risk portion and the savings portion.

(c) Suppose that during the sixth year, the actual interest rate earned was 25% instead of 20% and the actual rate of mortality at age 65 was 0.15 instead of 0.20. Find the gain or loss during this year, from interest and from mortality, for each policy in existence at the beginning of the year.

Reference no: EM131001004

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