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p70 =
p70 0.95
=
= 0.9896
p
0.96
2 71
75
x dx
71
= e 0.107 = 0.8985
4 p71 = e
5 p70 = 0.9896 0.8985 = 0.889
Question # 2
Key: B
Ax = / ( + ) = / ( + 0.08 ) = 0.3443
= 0.042
2
Ax =
+ 2
( )
Var aT =
= 0.2079
Ax Ax2
0.2079 0.34432
0.082
= 13.962
Question # 3
Key: D
Alternatively,
A65 A[60]
0.4398 0.359
= 1000
1 0.359
= 126.05
Question # 4
Key: E
P
P
Var ( L ) = Var 150000 1 + x v K +1 x
d
d
P
= 150,000 1 + x Var v K +1
d
One possibility is
1
d
Px a&&x
1 + = 1
d
d
1
= 1
1
da&&x
1
=
da&&x
1
1
=
=
= 1.0699
1 Ax 1 0.0653
Var ( L )
P
= 150,000 1 + x Var v K +1
d
= (150,000 )(1.0699 )
Ax Ax2
= 258, 478,900
Standard deviation =
= 16,077
Question # 5
Key: C
P(N = n)
0.1353
0.2707
0.2707
Question # 6
Key: A
= 29,862
Variance of net change = 16,800 + 29,862
= 46,662
( )
46,662
Question # 7
Key: E
All have the same benefits, so retrospectively the one with the highest accumulated value of
premiums wil have the highest reserve.
All have total premiums of 10, so the one with the premiums earliest will have the highest
accumulated value. That is E.
Alternatively, all have the same benefits, so all have the same actuarial present value of
premiums. E has the highest APV of the first 5 premiums, so it has the lowest APV (at both time
0 and time 5) of premiums for years 6 and later. Thus E has the highest prospective reserve.
Question #8
Key: E
0 (1 t px ) t p y dt
= 1 e 0.7t e 0.6t dt
0
= e 0.6t dt e1.3t dt
=
1
0
= 0.89744
0.6 1.3
o
7
chance of surviving Kevin,
13
1
= 1.667 future lifetime then if she does
0.6
7
(1.667 ) = 0.89744
13
Question # 9
Key: E
0.2
(1) = 0.98 ;
p25
0.6
(1) = 0.94 ;
p25
0.4
Thus 0.03/ (1 0.09 ) = 0.033 is the probability a life which reaches 25.6 will
die at 25.6.
For a life age 25 in the double decrement table:
(1) = 0.98 and no one dies from
Probability of surviving until t = 0.2 is 0.98, because 0.2 p25
cause (2) before 0.2.
Probability of dying at 25.2 from cause (2) is 0.98 0.09 = 0.0882 , since 9% of those who
reach 25.2 die then.
Probability of surviving beyond 25.2 = 0.98 0.0882 = 0.8918
( )
(1) , since no one dies from cause (2)
Probability of surviving to t = 0.6 = 0.2 p25
0.4 p25.2
between t = 0.2 and t = 0.6 ; probability = 0.8918 0.9592 = 0.8554
Probability of dying at 25.6 from cause (2) is 0.8554 0.033 = 0.0282 , since 3.3% of those
who reach 25.6 die then.
Total probability of dying from cause (2) = 0.0882 + 0.0282
= 0.1164
Question # 10
Key: C
Question #11
Key: A
1
Ga&&40:10 = 1000 A40:20
+ 0.04Ga&&40:10 + 0.25G + 0.05Ga40:9 + 10 + 5a40:19
14442444
3 14243
0.20G + 0.05Ga&&40:10
G=
=
=
5+ 5 a&&40:20
1
+ 10 + 5a40:19
1000 A40:20
0.91a&&40:10 0.2
60.127 + 5 + 58.806
= 18.21
6.8040
Question # 12
Key: D
Possible outcomes:
Probability
Result
K(55) = 1, J = 1
K(55) = 1, J = 2
1L
K(55) = 2, J = 1
1L
0.955(0.008) = 0.00764
K(55) = 2, J= 2
1L
0.955(0.06) = 0.0573
K(55) >2
1L
1L
= 2000v 50 = 1836.79
1 L = 1000v 50 = 893.40
0.005
0.04
50a&&2 = 97.17
0.955(0.932) = 0.89006
F(-97.17) = 0.89006
F(792.83) = 0.89006 + 0.0573 = 0.94736
F(893.40) = 0.94736 + 0.04 = 0.98736 which is > 95%
Question # 13
Key: C
v=
1
1.1
Var
( 2 L K ( 55) 2 )
( )
Before we can evaluate 1 L for any outcome, we must know the benefit premium P.
qx
px
0
1
2
0.3
0.4
0.5
0.7
1
0.6
0.7
0.5 0.42
px
a&&x:3 = vt t px
A1x:3 = vt +1 t qx
1
0.636364
0.347107
1.983471
0.272727
0.231405
0.157776
0.661908
t =0
t =0
Whichever way you solved for P, you can now finish the variance
K
1L
1000
P = 575.38
1.1
1000
1
P 1 + = 189.36
2
1.1
(1.1)
2
3
Conditional
Prob
0.4
331,062
0.3
35,857
0.3
405,884
P 1 + = 637.09
1.1
( 1 L) 2
(( L)
1
= 264,947
1000(0.66198)
1.983471
= 333.71212
1000 Px1:3 =
Question # 14
Key: E
The intent of this problem, not the same as the wording used on the exam, is that the future
lifetimes of (30) and (35) are independent and follow the same mortality table.
5
p30 = a
1
q30:35
=b
35
t = 0
()
p35 35
t
)[ p
t
30
5 p30 t p35 ] dt
Question # 15
Key: D
Pattern Necessary
12
112
1112
2
Probability
0.3
(0.6)(0.4)
(0.6)(0.4)(0.1)
3
PVFB = 0.3 ( 0.8 )(1000 ) + 0.24 ( 0.8 ) (1000 ) + 0.024 ( 0.8 ) (1000 )
= 405.888
Present Value of Future Premiums
Yr 2
11
Probability
P
( 0.6 ) P
Yr 3
111
( 0.6 )( 0.4 ) P
Pattern Necessary
= 1.6336 P
PVFB = PVFP
405.888 = 1.6336 P
P = 248.46
Question # 16
Key: B
(0.6)(0.3) = 0.18
0.3 0.5 = 0.15
0.3 0.4 = 0.12
Question # 17
Key: D
0.8 0.2
Q=
0.7 0.3
0.78 K
Q2 =
0.77 K
0.778 K
Q3 =
K K
Question # 18
Key: C
3
q
4 [ x]+1
4
q[ x +1]+1 = qx + 2
5
l
7700
l[67] = 69 =
2 p[ 67]
2 p[ 67 ]
q[ x +1] =
)(
4
4 8000 7700
3
q[67]+1 = q68 =
=
5
5
8000
100
3
3 4
3 4 8200 8000
3
q[67] = q[66]+1 = q67 =
=
205
4
4 5
4 5 8200
3
3
2 p[67] = 1
1
= .955805
205 100
7700
l[67] =
= 8056
.955805
Question # 19
Key: D
10V40
= 13V40 1
a&&50
a&&
= 1 53 a&&50 = a&&53
a&&40
a&&40
10 = a&&50 =
1 + vp50 + ( vp50 )
1 (vp50 )3
10 =
1 ( vp50 )
1 vp50
1
1 vp50
1 ( vp50 )
1
1 vp50 =
10
p50 = 0.9 1.06 = 0.954
*In a multiple choice test with numeric answers, you could have tried each of the answer choices
and discovered 0.954 works.
Alternatively, consider the recursive reserve formula:
( n1V + ) (1 + i ) 1000q
nV =
1 q
The only difference in the recursion for 11V40 , 12V40 and 13V40 is the initial reserve.
If
11V40
If
11V40
10V40
, then 12V40 would be even larger, and 13V40 even larger still.
10V40
, then 12V40 would be even smaller, and 13V40 even smaller still.
a&&50
a&&
= 1 51
a&&40
a&&40
a&&50 = a&&51
a&&50 = 1 + vp50 a&&51 = 1 + vp50 a&&50
10 = 1 + 10vp50
0.9
p50 =
= 0.9 1.06 = 0.954
v
Question # 20
Key: C
2
Let ( ) be the force of all non-crash deaths.
Question # 21
Key: B
Consequently 4 / 3 = ( 30 ) / ( + 1) / ( 30 ) / 2 = 2 / [ + 1] = 0.5
20 = ( 60 ) / ( 3/ 2 ) = 90
Hence ( 70 ) / 2 = 10
Question # 22
Key: C
1
1
+ 2.73 = 0.105
60
60
Question # 23
Key: B
( 2)
1
px( ) = 1 qx( ) e x = (1 0.1) e0.20 = 0.7369
(1)
( 2)
1 x +1 + x +1 ( 2 )
x +1
0
= e
dt
1 0.15+ 0.2877 )t
= e (
0.2877 dt
0
0.2877 0.4377t
e
0.4377
0.2877
1 e 0.4377
0.4377
= 0.233
( 2)
11 q x
2
= px( ) qx( +)1 = ( 0.7369 )( 0.233) = 0.172
Question # 24
Key: A
S ( x) = e
( t )dt
x
S ( 75 ) = e
1.2
0.01( 75 )
1.2
S ( 76 ) = e
0.01( 76 )
S ( 77 ) = e
0.01( 77 )
1.2
= 0.16888
= 0.16413
= 0.15951
0.15951
1
0.16413 1
100a&&75:3 = 100 1 +
2
0.16888 1.11 0.16888 1.11
= 264.21
76
1.2
( t ) dt
= e 0.01t
Alternatively, p75 = e 75
=e
76
75
0.028495
= 0.9719
(same as
0.16413
similarly for 2 p75 )
0.16888
Question # 25
Key: B
25
10
m ( 25 ) = ( t ) dt = 0.05dt +
0
= 0.05 10 +
t
400
20
10
p ( 4 ) = e 1.75 1.754 / 4!
p ( 4 ) = 0.068
10
+ 0.1 5 = 1.75
20
25
t
dt + 0.1dt
20
200
Question # 26
Key: A
1
and therefore variance
4
1
.
4
1
= 72.25
4
2
1
Var (T ) = 289 = 18.0625
4
E (T ) = 289
1 ( 1) = 0.84
The other approach looks at the distribution of N, the number of cell divisions that occur in 68
days. N is Poisson with mean = variance = 4 68 = 272 .
Pr (T > 68 ) = Pr ( N < 289 ) = Pr ( N < 288.5 )
= Pr
<
= 1.00046
272
272
(1.00046 ) = 0.84
Question # 27
Key: A
t + +1)
E ( Z ) = e t e t e t dt = e (
dt
e
+ +1
( )
E Z2
= 0.03636
= 0.04
0
+ + 1 1.06 +
0.04
= e 2t e 2 e t dt =
= 0.0185
0
+ 2 + 2 0.04 + 0.12 + 2
t ( + +1)
Question # 28
Key: C
16 AS
1320 =
1334.34 40 0.05 16 CV
0.946
= 912.40
Question # 29
Key: A
= 10 E30
20 E40
20 E40
A60 )
NSP =
1.67231
= 1.755
1 0.04709
Question # 30
Key: D
ax =
+ ( )
Ax = 3 e t e
1
2
( ) +( )
) (1)dt +
3 ( )
1 e t e
1
2
( ) +( )
) ( 2)dt
3 ( 0.02 ) + 0.04
( 2)
0.10
=
+
=
=
( )
( )
( )
+
+
+
+ ( )
1
0.10
P ( Ax ) =
+ ( )
1
+ ( )
= 0.10