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Thread: Question from Study Manual for Exam MLC (Abraham Weishaus)

  1. #1
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    Question from Study Manual for Exam MLC (Abraham Weishaus)

    If anyone is using the Study manual mentioned in the subject above - would you be abe to help me with questions 27.16 and 27.17. I have tried looking in Actuarial Mathematics and the notes within this section but am not sure how to do this. I understand that the reserve is the expected value of the prospective loss and this is the APV of future benefits minus the expected value of future premiums. However, I'm not sure I follow the solution.
    Any help would be greatly appreciated!!

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    It might be messy, but posting the question could generate a quicker response.
    act justly. walk humbly. love mercy.

  3. #3
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    problem 27.16

    You need to calculate the annual benefit premium with the mortality rates assumed at issue. That's the P_40 value in the solution calculated using the A_40 without the prime.

    Then you need to calculate A_50 and the a_50 (due) with the revised mortality rates. These are the ones with the primes in the solution.

    You then calculate the reserve using the A_50 and the a_50 (due) with primes and the P_40 value.

  4. #4
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    on problem 27.17

    The reserve formula is

    3_V = 1000 A_45 - P1 - P2 (1/1.06) 1_p_45 a_46(due)

    P1 = 1000A_45/a_40(due)

    P2 = 1000A_42/a_42(due)

    You are only making one immediate payment at the first premium level P1 and then making lifelong payments at the P2 level that start the following year.

    (1/1.06) 1_p_45 a_46(due) is equal to a_45(due) -1 which is what the solution has.

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