Question


Under a policy issued by a life insurance company, the bene t payable on death, at
the end of the year of death, is a return of premiums paid without interest. A level
premium of $1,500 is payable annually in advance, throughout the term of the policy.
For a policy in force at the start of the tenth year, you are given the following
information:
Reserve at the start of the year, 9V : $11,300
Reserve at the end of the year per survivor, 10V : $13,200
Probability of death during the year: 0.04
Rate of interest earned: 5% p.a.
Calculate the pro t expected to emerge at the end of the tenth year per policy in force
at the start of that year. Ignore expenses and all decrements other than death.