• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

CT5 September 2014 Question 7

T

Tina

Keen member
x=40 purchases an endowment assurance policy where Sum Assured(SA) on survival at age 60 is 20000 and benefit payable on death during term is 10000.Death benefits payable at end of the year of death.

EPV and Var=?
using i=4%pa and AM92 select

I didn't understand the solution too well.
Could anyone please explain this from start to finish?
thank you
 
Tina said:
x=40 purchases an endowment assurance policy where Sum Assured(SA) on survival at age 60 is 20000 and benefit payable on death during term is 10000.Death benefits payable at end of the year of death.

EPV and Var=?
using i=4%pa and AM92 select

I didn't understand the solution too well.
Could anyone please explain this from start to finish?
thank you
Click to expand...
Hi Tina
Can you tell me which particular bit you are not sure about?
Thanks
Em
 
Sure,Em.
In EPV , only 10K pounds,ie,death benefit is being used(and I was adding both survival and death benefits when calculating EPV) whereas for EPV^2,both survival and death benefit amounts are being used and in final ans of finding variance,EPV of only the death benefit is squared.

These are the things I didn't understand.
 
Tina said:
Sure,Em.
In EPV , only 10K pounds,ie,death benefit is being used(and I was adding both survival and death benefits when calculating EPV) whereas for EPV^2,both survival and death benefit amounts are being used and in final ans of finding variance,EPV of only the death benefit is squared.

These are the things I didn't understand.
Click to expand...
Hi Tina

Let me try and explain:
To calculate such a plan, we can either sum:

an endowment of 10,000 and a pure endowment of 10,000. So 10,000 will be paid on death or survival (endowment) plus another 10,000 on survival (pure endowment). Therefore if life survived they would get 20,000 and if life died they would receive 10,000. This is what was used for working out the EPV.

Or

a term assurance of 10,000 and a pure endowment of 20,000. This is what has been used to work out the variance.

Both will get the same result, ie 10,000 paid on death within the 20 years and 20,000 paid on survival of the 20 years.

Does this makes sense?
Thanks
Em
 
You must log in or register to reply here.
Back
Top