Thomas H

May 5th 2007, 04:11 PM

For a fully discrete whole life insurance policy of 1000:

1) The benefit premium is 30.

2) The expense premium is 7.

3) 1st year expenses - percent of premium = 95%, per 1000 = 10

4) renewal expenses - percent of premium = 10%, per 1000 = 2

5) Expenses are payable at the beginning of the year

6) 3_V^e = -21

7) 1_q_{x+3} = 0.02

8) i = 0.05

Determine 4_V^e

Here is the solution:

4_V^e = (3_V^e +P^e - cG - e) (1+i) / (1 - 1_q_{x+3})

4_V^e = (-21 + 7 - 0.1(30 + 7) - 2)(1.05) / 0.98

Here are my questions about this:

Isn't the expense premium G?

In lesson 45 the expense reserve formula is stated as:

t_V^e = [{t-1}_V^e + e - Gc_{t-1} - e_{t-1} ](1+i) / 1_p_{x+t-1}

Where is this P^e coming from in the solution?

1) The benefit premium is 30.

2) The expense premium is 7.

3) 1st year expenses - percent of premium = 95%, per 1000 = 10

4) renewal expenses - percent of premium = 10%, per 1000 = 2

5) Expenses are payable at the beginning of the year

6) 3_V^e = -21

7) 1_q_{x+3} = 0.02

8) i = 0.05

Determine 4_V^e

Here is the solution:

4_V^e = (3_V^e +P^e - cG - e) (1+i) / (1 - 1_q_{x+3})

4_V^e = (-21 + 7 - 0.1(30 + 7) - 2)(1.05) / 0.98

Here are my questions about this:

Isn't the expense premium G?

In lesson 45 the expense reserve formula is stated as:

t_V^e = [{t-1}_V^e + e - Gc_{t-1} - e_{t-1} ](1+i) / 1_p_{x+t-1}

Where is this P^e coming from in the solution?