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CS/JUN2012/ASC475

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE

ACTUARIAL MATHEMATICS II

COURSE CODE

ASC475

EXAMINATION

JUNE 2012

TIME

3 HOURS

INSTRUCTIONS TO CANDIDATES
1.

This question paper consists of five (5) questions.

2.

Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3.

Do not bring any material into the examination room unless permission is given by the
invigilator.

4.

Please check to make sure that this examination pack consists of:
i)
ii)

the Question Paper

an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 4 printed pages
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CS/JUN 2012/ASC475

QUESTION 1

a)

Given the force of mortality is

l
u

for 0 x s 100, for two independent lives,

f^"

inn
100 - -xr

(40) and (50), calculate:

i)

the probability that at least one survives for 10 years,

(5 marks)

ii)

.
(6 marks)

b)

LAZ Insurance Berhad purchased 2 new computers, with each survival pattern follows
de Moivre's Law. The future lifetimes of both computers are independent with a
maximum lifetime of 8 years.
i)

Write down the survival function for each computer.

(4 marks)

ii)

Find the probability that at least 1 computer will fail to function within 3 years
from the date of purchase.
(5 marks)

QUESTION 2
Find ~ ,
A 30:40

a)

if mortality is described by;

'

'

De Moivre's law with co = 80 and 5=0.05.

(6 marks)

b)

Constant force with /j = 0.06 and 6=0.05.

(6 marks)

c)

Makeham's Law with the following information:

U
X

= 0.0128

Cx

- a

= 0.0328
a

xx

AXx

35

14.2

9.70

0.80

36

15.3

8.50

0.82
(8 marks)

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CS/JUN 2012/ASC475

QUESTION 3
Given

u> =
P *+'

>

J
100 -

(JC +

forj = 1, 2 a n d t < 1 0 0 - x . Find:

o

(5 marks)
b)

g(t).
(5 marks)

c)

f(t,2).
(5 marks)

d)

E[T(x)].
(5 marks)

QUESTION 4

a)

The following table gives the absolute rates of decrement for cause (1) and cause (2).
X

?'f>

20

0.03

0.12

21

0.04

0.10

22

0.05

0.08

Obtain a double decrement table, corresponding to the absolute rates, by assuming

uniform distribution of decrement over each year of age in the single decrement model.
Hence, find
\n0)
2 I 1 / 20

(12 marks)
b)

Ms. Noni (50), is a general surgeon at a specialist hospital. Her career is subject to two
decrements.

c)
i)
ii)

Decrement 1 = Mortality which follows de Moivre's Law with co=100.

Decrement 2 = Leaving medical profession under constant force with
/ / ( > ) = 0.05.

Calculate the probability that Ms. Noni remains a general surgeon for at least 5 but
less than 10 years.
(8 marks)
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CS/JUN2012/ASC475

QUESTION 5
a)

Contributions to a pension plan of 5% annual salary are made throughout an

employee's working lifetime. Assume the salary scale function is _ =\ 2X a n c ' ^ a r a ' s
now aged 40 and earns a current annual salary of RM48, 000. If p*

n 08)~'

anc

'

5 = 0.08, calculate the actuarial present value (APV) of future contributions for Zara, if
the contributions are paid at mid-year. (Note: The compulsory retirement age is 60
years old).
(10 marks)

b)

A pension plan provides a basic benefit of RM20 per month for each year of service.
Assume entry age, x = 25, earliest retirement age, a = 60 and the compulsory
retirement age, w = 71. Describe the benefit function and the actuarial present value
(APV) of the retirement benefits for participant now aged 35 if:
(Note: Do not solve, describe the benefit function ONLY)
i)

The retirement occurs at mid-year.

ii)

The retirement occurs at the exact birthday.

(5 marks)
(5 marks)

END OF QUESTION PAPER

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