To: studygroup6
cc: (bcc: Susan K. Nichols)
From: MVadz @ aol.com
Date: 03/23/98 10:07:11 PM
Subject: Asset Share Pricing Model
I am having a little trouble duplicating an exhibit in the NEAS Study Aid
98-6-16 (not 16B) on Personal Auto Premiums. On page 25, it shows the
answer
to the sample problem. I cannot match the Fixed Expenses for renewals
(Column
(7)). I understand why I begin with $28 and increase by 4% a year.
However,
as I calculate down the column, my answers become further off. For
example:
Policy Year Renewal (Fixed)
1 0
2 29
3 30
4 31
5 33
6 34
7 35
8 37
etc.
As you can see, I'm getting further from the answers in the Study Aid. Can
anyone help me to clear this up? Also, should I be rounding after each
years
calculation or not? (i.e. for policy year 4, should it be 30*1.04 or
28*(1.04)(1.04)(1.04)?)