problem 28.14 ASM manual

[Thomas H]

I understand the solution as presented in the manual. However, on problem 28.9 he seems to take another approach to a similar type of problem by using the reserve. He equates the reserve plus the actuarial present value of future premiums to the actuarial present value of future benefits.

On problem 28.14 we are given for a fully discrete whole life insurance of 1000 on (40):

all annuities are annuites-due

i = 0.06
Mortality follows the Illustrative Life Table
a_{40:10} = 7.7
a_{50:10} = 7.57
1000 A_{40:20} (term insurance) = 60

At the end of the tenth year, the insured elects an option to retain the coverage of 1000 for life, but pay premiums for the next ten years only. Calculate the revised annual benefit premium for the next 10 years.

I tried to use the reserve to solve this:

1000 10_V(A_40) + P a_{50:10} = 1000 A_50

and then I solved for P. However, I got 27 instead of the correct 19. Have I done something conceptually wrong?

[qiling]

Your method is correct, I calculated it, it is 19.

[Thomas H]

Your method is correct, I calculated it, it is 19.

Thanks. I got 19 when I reworked it. I guess I was just making a calculation mistake.