Re: May 1996 Actex #9

james.smieszkal@zurich.com
Thu, 16 Sep 1999 10:41:13 -0500

Henry, aged 30, is subject to a constant force of mortality, u(x)=.12.
Henry wants to buy a 3 year endowment insurance, with a $1,000 benefit
payable at the end of the year of death. You may assume the force of
interest of .09. Determine the net single premium for this insurance.

We are looking for Ax:n or E[v^(K+1)]

E[v^(K+1)]=v^(k+1) * P(K=k)

P(K=0) is the probability of Henry dying in the first year which is q30=(1-e^-u)

P(K=1) is the probability of Henry surviving the first year and dying the second
p30*q31=(e^-u)*(1-e^-u)
With constant force, qx is the same for all x.

P(K=2) is the probability of Henry surviving the first two years. He will
receive payment the third year
regardless of whether he lives or dies in the third year. 2p30=e-2u

sum (over k) P(K=k)=1-x+x-y+y=1
where x=e^-u and y=e^-2u

Hope this helps.