Life Insurance Exercises 59.-64 are based on the following table, which shows th

Question

Life Insurance Exercises 59.-64 are based on the following table, which shows the average life expectancies in several countries.21 Assume that all premiums you calculate are based on end-of-month deposits in a fund yielding 4.8% annual inter- est compounded monthly to be paid out when a person reaches the life expectancy. [HINT: See Example 2.] Country Japan Canada U.K. U.S. Mexico China India Expectancy: 80 80 79 76 73 74 Expectancy: 87 84 83 81 977 68 Life Male Life Female 59. Calculate the life insurance premium that a 30-year-old female in Japan would pay for a $1,000,000 policy. ium that a 30-year-old

Explanation / Answer

Premium Amount(Compounded annually) = A*(1+R/n)nt - A

where, A- amount (1,000,000)

r- rate(in decimals) (0.048)

n- no.of times interest is compunded per year (12)

t- years (87-30)

Preimum= 1,000,000(1+0.048/12)12*57 - 1,000,000 = 1,000,000(1.004)684 - 1,000,000 = 15,341,208.11 - 1,000,000 = $14,341,208.11

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