You may be amused to note, if you haven't already, that the errata sheet
contains an error. For the formula on page 37, the errata sheet says that the
exponent on (1+ROR) should be j+1. However, if you follow the calculations in
the text, specifically the calculation of NRM1 (i.e., t=1) on page 41, you
will note the proper exponent should be j+1-t.
Less egregious errors remaining in the text include:
On p.48, the assets and risk margins at the 12/31 evaluations improperly
include the 16.14 NRM from the current year's policy. By 12/31 of each year,
this amount should have already flowed into income. Therefore, the assets
should be 587.31 and the NRM should be 8.54. The surplus and income numbers
remain unchanged (the change in NRM from year to year remains 0), as do all
the figures shown for 1/1/X. By the way, a simpler way to think of this is
that, at 12/31/X-1 the exhibit shows 603.45 of assets, but then we're
supposed to believe that on 1/1/X, when the company collects 577.23 in
premium, the assets only jump by 561.09.
On page 83, second formula from the top, I believe the + sign shown there
should be an = sign.
Dan Roth
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