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Chapter

4.73

Erercise 4.6
This is the case of De Moivre's Law with
ar =

100. In this case,

trx

100

100-x

-.r - t

'

P,(t) =

-&'L tp,

100-x-t'

frT) = ,p,.lt*(t) =tob=


Frrthermore, when De Moiwe's Law holds, we have

.l- =*( 4Ja-x


0

"-5t

J-4t

o)-x'
dnl @-x

da-xl

n.-1

At,A

= l"-"' ,i;dt 0

In particular,

(a)

Z)o,za

W = !ffi
25

= {tt

e-t,s)

0.237832.
rather bt =

O)

This is a more special case, because the amount of benefit is not Hence, the actuarial present value of benefit is:

1 but

eo'05t

l"o.os,
0

e-o.os,

id, = #

= 0.416667.

Exercise 4.7 De Moivre's Law is again assumed but this time with interest rate (not force of interest) of 10%, so that the force of interest is lnl.l, again with ar = 100. We have: (a)

4o,r,n=

ffh

=o'oe2oee'

(b) The second moment

is. ,.

271

,bo,iol

- -

d*lo='^

ldr-_#

0.063803.

Therefore,thevarianceis:27j6.,nr-(40,r)t = 0.063803 -0.0g20gg2

0.055321.

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Acluarial Mathematics: Solutions Manual for Exercises

o) (z*) =

dt
INTEGRATION BY PARTS

, (_Ltfi+o.osr)-3)lt=r00-'r, , toor* 4a, = roo-i(-T'\rrv'wJ'i, +loo;


)1,=, J

=-f,oo-r), roo#(1
= =

+ 0.0s(100

-'))-" .

rd;l-Ai'tt

1 ( zP

dET
11t=roo-x

o.or')-',,J1,=,

-tG -0.05x)-3 .

=ffi['-(*)')-+(#=)'
Exercise 4.9

-+(#)' . 46(ro -

mfu(r

-(r * o.os(roo - 4)')


rolo - o s')-' )

(a) We have:

Mr(i
Therefore,fors = -d'

= E(e'r)

. [ "" ,p,. p*(t)dt.

Mr(s)|"=-u = I
0

n* ' ,P"'Pr(t)dt

= A\.

(b) For the gamma distribution,

.frQ) =
Therefore,

fr;wo"-r

"-ft

,t >0.

MrG)
Using part (a) of this problem, we obtain

=(*)"
=

A* =
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Mr('=(#)"

[,

.fr)"

Actuarial Mathematics: Solutions Manual for Exercises

Chapter 4

79

Thus we have:

E(z\

r.1*'(r -,i)* el ;
z=l

:.('-r-[+,u' )"
'-*['-(:)r) *.
=
Exercise 4.14

5 -e-t'2 o 0.41766. G

This is De Moiwe's Law with o = 100. Note that we have the following discrete versions of De Moiwe's identities proven in Exercise 4.6

A'

=Z ,t=0

al-x-l

rlq,''o*t = t

a-x-l

at .rt*l ua4= a-x' ?o ,-, 1

Ata = 2rlq,'nr*t
&=0

n-l

=l

1.yr+l7=o@- x
i

n-l

a;l

(t)- x

Therefore,

(a) A+oid

ALxt* A*,)4

60

-,,25.35 ''
60

0.407159.

(b) This is a bit more worlg as it requires referring to the definition again, but we can again note
the general formula fust:
rul-x-l
k=0

" . rlq* =

,f'{o*r;ut+r a'-x-t
,t=0

.-l-- =
o-x

o)-x "i'=

In this case,
(Ia)an
60

(M)qo =

t ii=^- - 60v60 -^- . = 60 out = 5.554541. 0.05

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Actuarial Mathematics: Solutions Manual for Exercises

80

Chapter 4

Exercise 4.15 We have

A,'4 =. frot
,t=0

plq, +un . np,

m-l

&=0

Ir**t

.rlq,+ Ir**t.,,\q,+rn.,p,
k=m

n-l

,q!.-l+v^ =,ql.A *

.p*.nf'ur*t
t=0

'
+

rlq**^*v^ ' ^pr'v'-^ ' n-^P*+^

r^'

^P*'(lrl*^,r=a
^
P

vn-^',-.P**-)

4-a * v^'

r'

Ar+^,;=al.

In words: Single benefit premium for an n year endowment can be viewed as single benefit premium for z years of term life insurance protection, plus single benefit premium for an endowment for z - myears deferred by rz years' Exercise 4.16
Here we have:

Ar= Ir**t . olq,* Lrr*t . olq, k=20


&=0
@

19@

a a a a a a a a a a J a a a a a a J a a a a a a

= At.,a*'20' zoPr'
and

/r=0

I'**t'

rlq"*ro

et

af

'iol'A,*ro'

4Zrl =
Therefore,

Ar,g1+ Ar,fi.

(a) A, = At,n* A,,)rj'Ax+2' = (A,a- A,h)*


A,,*oi.Ax+20

= = A,Id-(l- A,+2iA,,hl.

a a a a a a a a a

Substituting the values given we have:

0.25
so

0.55

-0.601,.h,

that

A,,h=i.

a a a a

O) et-n = A*rol-A'ht = 0'55-0'50 = 0'05'


Actuarial Mathematics: Solutions Manual for Exercises

a a a a
I

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a a

(b) Eo = 100.1000.40 = 10,248.35. Er = 1.06. to24l.3s-1s9,6ss'ljl?682 = ' 9s013.79


Ez = 1.06'
lO,7 10.36

10,710.36,

-f

OO,OOO'

ffi
**{ 9s0t3.79

= =

LI,192.34, LI,694.76,

Et = 1.06'11,192.34-100,000

Ec = 1.06'11,694.76 -199,969' 1695W = 12,218.04, ' 95013.79


Es = 1.06'
Exercise 4.19

12,218'04-100,000';ffi = 12,762.58.

(a) For

a death occurring

inthe mth of a year following age x + k *

*,the

benefit is payable at

the end of that m'h andits present value

is ur*# .

(b) Consideradeathattimeswithin
tPl
I

ar,

*'h of ayear,with

s.[0,]].
I

T'n"rt

lr,

.,0**r*1. F,*r*t(s)ds =

r'

*Q"***!

is the actuarial present value of benefit at age x + k +

fi , and'

f,*
Ay)

'px+k.(u,.*n,*o**)

t'#

.*l*q,.r

is the actuarial present value at the beginning ofthat year. Therefore,

,r=o

ir**' t,r op,(y,r*.rl*n,*l) = *=o on,'(f,o*il*# '*l**.') n [r=o at


\.r=o

(c) Assuming Uniform Distribution of Deaths (UDD)'

7 J
J J
J
J J J J
J J J

L'q,**, ,l il^ tQ,** = m AY) = Zur kP,


,t=0 6

*t

[iu.r.*
+

*l

*n*r)
oln.,f) =

&=0

Iro "

olq*

[F,,'

;)'I-#

*) =t,*.'

h}r*'*lQ,

j;4'

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Actuarial Mathematics: Solutions Manual for Exercises

a
C

Exercise 4.27 Note that for failure at time t the amount of benefit is b, = (t

-*)".

The single benefit premium

for this warranty can be expressed as:

Aa-lrn)la ="[Au
(a) Under UDD

+)
-i;
tqroa.

4a

-|rzr;u

= =

*4'u-t;(tzri'-(+- *)4')

;('.i(;-+))4,
10.2, k =0,4, {o.L k=1,2,3.

We know that i =109/o andthat

tl4o =
Therefore,

4A = 0.2v+0.Iv2
and

+0.1v3+0.lva+ 0.2vs

o 0.53207989,

(u)toa = 0.2v+0.2v2 +0.3v3 + 0.4va +vs x 1.4666285,

;('. +(} -*))4' -I*,,n iu 0,t9 *!( - rn1.10[ 5[t-* -a]]0., [, ' - lrl,r.to ))

3207s8s-

0'10 l. 4666z's = 0.3072t5. s ln1.l0

(b) If the warranted return is the reduction in the price of a new product, the answer to part (a)
would not change, as the customer could take a cash refrmd and apply it toward the purchase ofa new product in any case.

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Actuarial Mathematics: Solutions Manual for Exercises

_I
Erercise 4.28

Irt

be the cumulative distribution function of the standard normal distribution. Then:

Eek)

=l"u.onu.ft;* o,
=

-f*
0

."-+(h.+n\ o,
rz _1(rt+zit+.(*f))dt

= l-L'e'e'
l-

!s.'l2x
i542n

t =5 "*'g!."-i?a*t)'

41

l",l2r

lr=L*k. l-102'

t=o + ,=! = z"*(t 2 +"+"!h' "-i" d" = ll\dz=dt, t+oo=) z-+6 ,

-t(r)

@)

v, = 2e1t8(t-t(r) x o.6ee2.
= 2et/2(r-oOl) x 0.5232.

b) 'A- = 2e4t8[t-t(;)

@)'A*-(4)' = 2ett2(r-o1r;)
2i we have: 0.5

-(r"'''[t-.(;))' '

o.oror.

(d) Let q2s b"themedian of Z.T\ensrnceZand7areinverselyrelated, it 6l't isthemedianof

= Pdz.2'5) = Pr(z' |'t)

= f,@o' =

r{ 'I

+@ .

t2

J#"-hd,

--_t-, =l.riit=,,, t=d.t = "=!9'tl ,-* ,-El


INTEGRATION BY SUBSTITUTION

=2f#,=,[,'[#))
l0

This implies that

'-r[4]) = [10J
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0.2s,

or .[#)

0 75.

Achtarial Mathenatics: Solutions Manual for Exercises

92 a C\aoter 4

The 756 percentile of the standard normal distribution is approximately 0.675. Thus

+
But

20.5

= 0.675,

or

l5 = 6.1s.

()s =

e{.os'f's

e4'os6;s

0.713.

(e) We have

Z. = [r.fr?) dt

=*l 2t "-t dtoJzr

o,

f u=m, /=0+ U=0 zodu=ff, 't,o+ u->


INTEGRATION BY SI'BSTITUTION

=w"-udtt
u2,

(-#*)r
x
0.6710

fto-o)
4.

#"

7-s788.

"--o.os.i.s7ss

< 0.6992 =

Exercise 4.29

Let u(w) =

-"-6*.

By Jensen's inequality,

E(-"-6,) = -E(e-6r) = -7r<-e-6EQ) = -e-6E(r) =-e-52'


Hence,

e-o"'=v"t

-o

3Ar.

Exercise 4.30

(a) v, =

*r[-lO*)

b) z=brvr=D,oo[-h-)
(c) E(zi) =

,lu,["-[-i--)J']

"["*,[-ir--)]

= E(z)@ro,cei6,

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Actuarial Mathematics: Solutions Manual for Exercises

94 o Chapter 5

(b) We have

lr = 100.1000'12.76I,
o2 =
!00.10002.10.230,
rv 10.1000.3.198.

o = ,[7
The coefficient of variation is

g*
p

,JPu.*

x o.o25t.

Exercise 5.3
We have

var(a71) =

#('r, -'2,)

#(r-262a,-g-da,)') = #(t -262a" -t + 26a, - d'al)


= ?(u.
Exercise 5.4 We have

-'

a-

-)-a:.

cov(Aa71,vt) = Con(t
Note that

-u',r').
).

var (6-vz ) + vr But

) = Var(l-vr ) + Var(vu ) + 2Cov(l-v',r'


6 + Var(v?) +

var({t-v?)+vr) = Var(l) =

= var(l) + var(vr)

2Cov(I-vr,vr )

=
Therefore

zYar(vr)+ 2Cov(l-vr ,vr).

Cov(l-vr,vt) = -V-(rt).

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Actuarial Mathematics: Solutions Manual for Exercises

Cbapter 5

99

Exercise 5.11 We have

var(cq) =
Exercise 5.12

var(h-l)

= Var(4;r) =

u.[L#)

#trrt

".'1.

(a) We have
n-l

dr.il = Zur rP" =


k=l

Iru*t &=0

k+lPx

= lPr'lvk
fr=O

n-l

kPx+t

= rEr'dr*r,il'

(b) hthis

case

,la,

= ii,-(d,,a+,8,) =+

+-

nE, =

#-

nE*.

Recall that], isthepresentvalueofaunitlevelperpetuitydue.Basedonthat


value of a perpetuity of

I annually, starting

it,tr"
if earlier.

at the end of n years, or year of death

cao"etsthe payments at the end of the year of death, and on. This combination provides

1 at end of n years,

if alive, which is cancelled by - nE,, leaing ,la*.

Exercise 5.13 From

| = dii -*A -.
= 1-v,
we obtain

recalling tl:mit d

A*A = | - (L-v)ii *s = | - d*A * r' r.,^ = v' d,,,-,- (or,r-r) = v' d

ril- ti,;11.

Exercise 5.14
We begin with the calculation

of E (f')

y2 =)t lz

lz r-r**' i+2 r-vzK l;.: ,. ----.:r---_, t ,-+zt


.t

K=0,I,2,...,r-I,
K = n,n*l,....

r-r' i+2 r-v2' a1-=a- +-''a71, , 2 i+2 nt i nt i ' Lt i -'i i'+2i "-+

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Actuarial Mathematics: Solutions Manual for Exercises

102

g63p1"r 5

Exercise 5.18 Recall the formula 1


and its analogue

= f .ar+(l+i)A",

t = i@).oY) *(r.#)^f,
By equating the two we obtain

i'a" * (1+i),4, =
and from this

i@).*,.(r.#)nr,,

d...............:n)

go,* #(n.',n"-(,.*)^r,)
AY

AssumingUDD,

,;,g+
e+i)

=,{()'q*.

Therefore

*t =# r. .h
"ff'

A.-#[' .#)nr,r,,

.# e+i)..4, #['.#) ,f,.,e. = tf' 'o" .n(#-# .+)"r-,)


= tf) 'o,
['
=

,f,

.o,

.^"#(-[,.#)

,f,)

= tf)o**

t,fi

(t-"i-,)

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Actuarial Mathematics: Solutions Manual for Exercises

Chapter 5

105

p(tz)=ffi
_ =
t-tz.(e+i)t/t2 _t))
tz. (1t+i1t t t2 -t). tz. (r - 1r*4-t,t, ;
0'06

- 12'(t.Oetrtz - ')

l:

0.4681195348.

By substituting these values, we obtain A[?.h"15.0383835 and

3111-+=

HxD6.3to4n2.

Exercise 5.23

(a) We have

Y=l
(b) Based on part (a)

l<ra>9-n, o<K< n-l,o3J <m,

^-;l

ftrlf,

K 2n.

E(D = @)ff)

=f,Oagil,
k=0

and this can be seen since the payment pattern implied by the sum is the same as that implied

AV

(Q!].

Forexampleif m=

thepaymentpatternwouldbe

+.+,*, 1].,?,2,
if x dies between ages at age x +1.2I.

Exercise 5.24

(a) We have

,=

0<K< n-1,03J <m,

{Y'F*EI, K>n.

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Actuarial Mathematics: Solutions Manual for Exercises

106 o Chapter 5

(b) We have

(Diiln+(rg(f; = @+\ffi,
so ttrat, using the result from the previous problem,

(DiDn = @+L)ii(1-(r,iln
(n+t)ii(1-_i__
i;(1 +

lr:*
rlr$n) =an .Eo:%
=
k=l

Zt,# -

Ia(4. L't
a:.nl

Exercise 5.25

(a) We have

Y=4 ':

I rn>9^, I
"-;l

0<K< n,O<J <m,


/

lt'lf '."(a3*-rff'),
23

n<K,0<J <m.

(b) Again using results from problem

E(Y) =

(Iiln*"Qaff
n-l
&=0

l*l a%+"(Srff')
n-l

' = ;(-' ii(\+,iaff')


=
,t=0

>ovf).

Exercise 5.26
We have

d(h)n+T-vr = u.u^-{''
We take the expected value of both sides and obtain

+T.vr = af,.

6(Id).+(IA)* =

q*.

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Actuarial Mathematics: Solufions Manual for Exercises

l0 r

Chapter 6

Exercise 6.4

(a) We have F(.a,) = p=0.02, as E(I) =i=SO. (b) We have L = e6r -Pail
of 2' The 50ft percentile of I is found at the value corresponding to the 50-th percentile of Z, which is ln2 times the mean, or
and this is a decreasing function

ry=ffix34.66
so that

years. Based on this

0=

,-o.o6"ue

-p

-r=t=oj#
0.02

P=

=L .rb'?
o.s2 I

az 0.0086.

(c) We have

| 0=l-PZ* = P- o, =u x .
since with zero force of intere st e8t

=t and f (aV) = E(T\ = Z*.

Exercise 6.5
We have

Fru
This shows that

I g =

v' . 1p,p"(t) dt

_
0

Ivt ' ,p" dt


r>

FQe)

is weighted averige

of p,(t) for

0.

As all values

of p,(t)

exceed

p(x), we conclude that F(A,)> p(x).


Exercise 6.6

If the force is constant, then

Z, =\n*+6)t . pdt =
0

#g,

and

')-

U .,, - p+26.

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Actuarial Mathematics: Solutions Manual for Exercises

Chapter

6. lll

Tberefore

'.q,-Z:' _'Z-_ei

(6a*)'

(l-A,)'

equals

VopErercise 6.7

pp2

(p3

+2p26+p621-2p26 62 (p+26)

_p

p+2

'L.

Ifd=0,thenyt=land
@

Ff+l=s0

I t p,p,(t) dt
I tP, dt

=*.
a

Erercise 6.8
We would like to show that

var(vu) < Var(vr -F.dT),


where F

=FU),

or, equivalently, that

var(v?)
But this follows directly from the fact that Exercise 6.9
We have
d-a*
dn

. (t.5)'

.var(vr).

(t. #) > 1, as both F and d are posifive.

"= (u@)+6)a,-t

and

dZ,
dx Based on this

-,(p(*)*6\4-pG).

(,. *)uG,)

(r +

(p(x)

+a)a - r)F1 a) - ((pr.1 + d) a - p@)

= (t + (p(x) + a)a, -r)-f; -@@) + d)7" + p(x) = (p(x)+ a)a -(p(xy+ a)A + pG) = P(x).

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Actuarial Mathematics: Solutions Manual for Exercises

Exercise 6.10

calculations in the first row are based on the following identities:


z:s"iol

= ,,io *n:r^*toErs l('hs-rc'Ers)+

rcEts'
rcEE

i(,4ts- rc Ets' /as) + 5'

Asid = (4s-rcEx'&s)+

rcEzs,
rcEgs

P(zrr,rr)

=mt;, #(4s-rcE$'&s)+ d' =ffi l-(4s-rcEts'4s


Ats.n-=i

+ roErs) '

__ 5s:iol :
D

: ilr*roi E*n - T:4m -

ns'&s) + vro' to pts) . 4Ar_vto.topts.,4cr)+rto.rofrs)'


d'((,hs-v\o'
ro

Calculations in the other rows follows analogous formulas.

Exercise 6.11 We have

,o4u-P.1a

=HH=W=#=
k=0
&=0

zoP(zolrc4).

Exercise 6.12 We calculate

= iv**t . *lq, = iro*t1t- r)rk = v(l-r)l(vr)& = v(l-r)


t=0

@@6

:- l-r l+i-r'

'd.=+=('-ff|) +=#+=#,
P* = ax
Furthermore

#=

\-.r,. l+, of

,'A"

is calculated the same way as A, ,butthat it is based on doubled force

interest, resulting in

24=&
24-L2 _ (l-r)r (1-A,)2 l+2i+i2 -r
Actuarial Mathematics: Solutions Manual for Exercises

Based on these values

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l16 o CtrapterT

Exercise 7.5

In example 6.I.1 elq, : .2 for k : 0, 1,2,3,4, futrs, f is fte uniform discrete distribution on 0,1, ..., 4. Assuming the UDD, Iis rmiformly dishibuted on [0, 5]. Thus this problem is a repeat of example 6.1.1 to the situation where the variables are now continuous instead of discrete. By the IDD a here is 6.1.1, etc.. Exponential reseryes are not worth ino ^exaryle the effort of calculation.

k:

Exercise 7.6

& : vu - PZ,,;)a6ifor0 ( U < n - t,andvn-t - F.a;4,U ) n Nowrz : vu -P.uq: vu-P(#) : ,u[r + #] - f


rhen
since

t.

var(,e

var(vu)

from (4.2.10),

2Z then Var(rz) - "x+tin-i "+t"n-d --/ ' ar,;)z -2 16

[t

. f]'uuruur: (4)'.
7,*,nn1r),

var(vu).

(r7,*,,;4

Note:
Exercise 7.7

Z- tlr>t: U, the future lifetime of (x*l). f'-t _ aA uPx+t ltx+t(u) du * d;4 n-tp*+t J, vu - uPxtt

El'Ll :

Var(1L) Note:
Exercise 7.8 1a) l$V@35.g)

upx*rurrl,'o-'

u) : $ v"'t, .fi|r7,*,,v

* Io' ' vu upx+tdu *

d;4n-tpx*t

dx+t:Frr

- V,*,,42f

?- tlr>,: U, the future lifetime of (x*/).

V+s,x:1

2sP(A35,,s1) z+s,i6i

(b) There are no future premiums, so 5 Z+1,O

Vlost

Exercise 7.9

: -lnCP(A,Xd + P(,aS1ti from Equati on 7.2.5. o) 6 : ln(1.06),P(Vd : .020266 =+ uo : T\35) - 20 :23.25 years.
(a)
uo

Chapter 7

. ll7

Exercise 7.10

(35J0 :65 t.-Setting the minimum loss to 100 The minimum loss occurs when zero is the same as setting 65 t equal to -ln(P(As)/(6 + P(135))/6 23.25 years. Thus

U:

t:

47.75 years.

Erercise 7.11
Analogous to the development of (7.2.9).

Exercise 7.12
Same comment as problem 11. Nothing is done in the text vtdth these densities except to xhibit another formula.

Erercise 7.14
fl-v(.1'aq1:

(a) Prospective: Zso - 2sF(Vai att,Tdi (b) Retrospective: zoP@+i.s+o,i6i - ,oEoo (c) From the prospective formula, we have

It_^rce,,r$]z*:lr-fu*urn^ln*
(d) Alternatively, from the prospective,

l*
Exercise 7.15

- roP(tdfdso,6i :

I roF(Zso)

roF('n^1] aro3q

,o-tr(A*.6):

(a)

Prospective: Vso,Tot

P1Ao*5paro,6i

O)
(c)
(d)

Rehospective: P@c06il.3+0,I0
Anarogous to

roEoo

4(c): I

t -'+#4lr,,t t'"so:lol/
'
J

Analogous to

4(d): F(7ro,ioj)

(e) From (a), since Vro5ol we have

: | - 6 Z56.iq,
*6

P(A+o.ro)]aso,O

- p@ao,ro1) + a]aro.t
: #^,
wehave
Aoo,^l
-

(0
,\ (g)

From (e), since F(7*.61)

t - 3t'g u4otzol

.From(rr,

,^

air,t-z1y-

---v4ofrl

dn;tg

- - l=z;{,

Ato,Tol

sinceZ

| -V : ---T-'

Exercise 7.16

premiums: tz|V(tola34
Exercise 7.17

Retrospectively, there have been no benefits, so the rreserve is just the accumulation of past soF($l zrsFssfrl.

Begrn with the retrospective resewe formula:

Multiply AyP,,*t :
! P,,;t'
and

^T @,.-*,t)

: FF,*-) :
d,d

s,.6

^8,.

^E*, ^8,

^r(,,^*;1) : Vlr,A

-/-

ffi.

n"rproduces
\

-/P\A,,^*,1)

--r P(ai,a),since,E,'s".4

This establishes (a). It is interpreted as seeing the premium

which provides the coverage for those m years,n@ia),and the other which provides for the reserve after m years, if alive. Thus the reserve is in the nature of a pure endowment benefit, so the premium for it is a P.E. premium. Now multiply equation (a) by Fr"1, and subtract ,E* fromboth sides. This yields

PF,,^ ) in two pieces: one

totally parallel to that for (a).

Exercise 7.18 The given equation relates to formula (7.3.3). This equation states that the reserve at the beginning of the interval (at time 10, interval length 5) is the a.p.v. of benefits payable during the interval plus the a.p.v. of a P.E. for the amount of the reserve at the end of the interval, less the a.p.v. of net premiums to be received during the interval. If we rea:range
the equation to read

6r-i t= ' ilV@ro) + z"nP(7n)d1,6.r: ZloA +


2OTtr-7 t

--jt

sE+o.V(An),

we show that the a.p.v. of all resources available to the insurer at the beginning of the interval is equal to a.p.v. of the uses of those resources.

Exercise 7.19 This is totally analogous to Question 14. Exercise 7.20 This is totally analogous to Question 15. Exercise 7.21 This is totally analogous to Question 17.

Irrlrei,*7.22

Since Since

pZ,;
drA

: , - d.ffi- : *,** W
iira2la@

6'

Ttu"

, vzl?-kn-2H : 2.ii**p,4,A* +- nxlkn-lcl ffir_O ti: )'-g : t' FinallY' kY*asT: . wr*?-kn-2A qx*kn-kl
l--4

tt_

-r r-5 4 -

5'

kdn723
FtI$r Continuous:

(a) ro-K4ss-i)

dA:

dt

-f

: |#^:

'l752905usingz'';

: a(x)ii,q-

0(m),

nPxdx+n and the values

of d" in the table

fud4,ontinuous: (b) rcY6s): i(rovzs;


FuIIy-Disoete:

: itr - ffi): .08566


r.o.1aor.m1:

(c)

rc%lssT

Arts.^1l-

Pt

.03273

usingl|r.,

A4s

f0

zopesAos

.08846

_-;3s'301 - 3s301 atssTi

pt

Ats
ii3s

v"u soPssdes

flgon$Aes: .oo4gl5

Eisf4:

dos

- fo zoPtsiies: ll'575

hdrc724

: i n'.a + A,,k # *n.a : i.e*r - i ' Px' iix+k {tCL) : : I |,l.*r - P,. d*+kl : t. rr, (c) Yes. {(1,;1) - V.i*a=A ' e(/.;1).dnp.4 : t' A|**a - t P'",a' d,+*i4
(a) (b)
No. Recall thatV*6
Yes.

7',a * A,,h 7,+t - P(A,).a**e

: tlni.-^-

pta.ii,*r.frf

t.ov);t

bdc&7
Xcptacinghbyh+1,(8.3.9)becomes nV * nn Then6'1Y'v'Pr+n : (nV * ri - bn+r 'v'1x+n

bn+r'v'Qx+h

n+rV'v'Px+h.

*+tv:
GV

@#P
+
nn\Q

-bn+t

ffi
as

Thc interpretation is most easily seen

if we write it

i) :

bn+r ' Qx+t

r+t Y'P*+t

Now the old reserve plus the premium, with interest to the end of the year, is sufficient to povide b6.1 if the policy dies (with probability Qx+n), or to provide the new reserve if the policy lives (with probability P,+n).

kercise

8.8

(a)

fi'w:
Since (r,Z' +

k-l

-+re,
t :

Dr'*' ,lq*

At :i,'APr-#:kv*

(retrospective form). The reserve is just the accumulated value of all of the premium income, less the accumulated value of all death benefits paid out, taking account of the benefit of survivorship in the accumulations.

(b)

P, - r.e,+h(I-n+rVr)
k-l

PrXl +

e*+r,

(l - n+tV') * l+r l/*,then v.n+rV, - tVr. Thusthegivensummationbecomes

Dt"' h4
This is

n+rv,

- nv,l(o*l*-n.

a telescoping series which is easily seen to reduce to kl/x. Interpretationz rY, is the accumulated value of past premiums without benefit of survivorship, less the accumulated value of past benefits without benefit of survivorship, such benefits being only the excess of the

insurance amount over the reserve.

Exercise 8.9 From (8.3.14),

IJercrl: fr,andfuwehave
Tr

rn-r :

@n

- nV) v Qx+h-r *

v ' 1V

n-tY.

1rV,sO

tV : zr(l+t) 2V : [zr(1 +i) +


Tlrl:.s

v. pV - 1,-1V,or 1'-rY *zr)(1


n](1

* i) :

1V. Then with

sV:0,

we find

+;) :

r'i1,etc.

pV

n.

Exercise 8.10

(a) v'ii*,4: PYB

: Du^i h=t

n-rlq,

: hDO-r-\l
h=l

n-ilq*

It(,/ ,-,1a"- r',-te,)


if, - dii*d #-ii"fr:
Thus

: hViu - ,"

rqrf

nE*

dit-d*;t

-f

+ tr ,Pr)

n:

uo

ux:nl

;:'a

(b)

From part (a) we see that, attime ft, the

n .d,*1,,;4.Thus

1z : (o^ -

PW - d;:A - d"apffi. a-**.4) - n'ii"*p.4.

Clearly the PYP is

Exercise 8.11
(8.4.3) sals pasZ

: :

bk+t

rr-s

t-sQx+k+"

r+t

V'vr-t

l-,rPr+/c+s'

Multiplying bY ,P*+k,we obtain


spx+k.

k+sv :
*
vr-t

b*+t vr-t r[-"qr+,t


bk+t vr-t (qr+*

t+r

V'vl-t pr+t
t+r

- sQx+k) *

V'r'-'

p**r

sPx+k'*+sV

,qt+kbk+t :

: : (t+i)GVqri

vr-t(b*t' Qx+* * *tY'P*+t) ,t-sQ,V + zrrXl + t)

Interpretation: The old reserve plus premium, \nith interest to time s, will provide the reserve at time s if (x * &) has suruived to that time, or provide for the then present value of death benefrt(bwr to be paid a?year-end) if (x * &) has died.

Exercise 8.12

Interpretation for both (a) and (b): The reserve is sought at a duration between two consecutive premium-payment points. This reserve is approximated by interpolating linearly between the two adjacent policy year terminal reserves, and adding the unearned premium for the current premium period. The interpolation coefficients on the two ierminal reserves are easily obtained. Since r is the fraction of the year beyond the last premium payment point, then (j - r) is the fraction of the year remaining to the next premium payment point, so that is the appropriate fraction of annual premium unearned. Note that this fraction multiplies the annual premium, not the fractional premium actually paid at each premium payment point.

ffit2t
(e) ElT
-t375(l) +
375(3)l (362.12)
as

t2s0(1)

2s0(3)l(561.08):t,104,260

(b) Yt(4 :

6,450,962

before

c:l.&5l@+l,lo4,260:l,108,483,whichis1.00378timesthereserve.
(c)

vu(z) = [37s(l) + 37s(9)X1187.14) + [250(l) + 2s0(9)](343.84) : ct :


1.645

s,3rt,37s

as

before

\ffi

37gl.l4,which is .00343 times the reverse'

(d)

44 : 110,426,000 Ya{Q : 645,096'250 c : tto,426,ooo+ 1.645\@250 : 110,467,780,


which is 1.000378 times the aggregate reserve

Yar(Z) : c1 :
Erercise 8.29
We seek 10,000

531,137,500 1.645

\@

37,gll,whichis.o0o34timesthereverse.

rcrpY{tl(4')
10,000

ll.rcv{t}(Vto)

+ }.rrv{r}(Ato) +

t.p{t}(7ro)]

s,000 [ toV (Ail


Exercise 8.30

n-vGzi + P{t}(7ro)].

SinceP,a
Since12".1

: *, - 4
: t-W:
:
L

then d",Tt"

: ffi
:
1

(a) d*,Tt : l*uprd,*1a,soQx:1-(1'?'*q83) :


(b)
dx+ril1

f,**d,+r't:
-

.78ii*.4:

T-iE
:'25

:
.2

2.083.

t.625

vPx+r,

so4r+t
p"+h'

(1'2X'625)

(c) It'r, : f

As : (#)' G-.66)2(.2X.8) : .6084 A1 : (i=)' (3 - l.s6)2 (.8x.7s)(.2s) :


Var (62)

(b^*t

r,+rY)

Qx+h' hPx

.216
.7584

Ao

* I Ar :

.6084
-27

+ .69M4 (.216) :

(d)

Var(12)

(Note that there

: X : # : is no risk in the final year of an annual premium endowment.)

186

Chapter 15

Exercise 15.5
Since a select-and-ultimate table is used the life insured is [a0]. Let G be the expense-loaded premium. Then this premium pays for the following items Qisted in terms of their actuarial
present value at issue):

Commissions Premium tax

of

0.40G + 0.0sG\",l,sl

0.35G + 0.O5Gajao1iol.

of 0.02G\+o1lil.
of 12.50+

Maintenance expenses Death benefit Therefore,

4o4oj = 8.50 + 4\+01,A.

of 1000{+01F.

GAt*lul=0.35G+0.05G41+ol,iol +0.02Giip1.;.1+8.50+4\ao1a+1000{+ol,zs,t,

or c(o'laa1+01.- - 0.05d1+01,a - 0.35) = 8.50 + 4a1*1,Tit+ 1000{+o;,rsl,


and hence

GExercise 15.6

8.50+

a\*l4+1000{+o[H
-0.05&1+olrol-0.35

ooo{+o1B + 4d1+o16i+ 8'50

0.98i1+o16

0'93d1+ol,E +0.05'roE1+01'A[+o]+ro:i3

-0.35

This policy has a single premium

that pays for all benefits and expanses, so that premium is calculated as the actuarial present value at issue of all benefits and expenses. The premium pays for the following items (listed in terms of their actuarial present value at issue):

fI

Therefore,

Taxes

of 0.025II. of 0.04n"

Commissions

Other expenses

of

+ 2.50a*--t

2.50 +2.50ii".;1.

Benefits of 10001,;1.

fI
so that

0.025fI + 0.04fI + 2.50 + 2.5Oii,.A+ I 0001- .r,

0.935n =
and

2.50 +

2.50ii,s+

10001-

.r,

2.50+2.50A xint 1+10007x.:nt 0.93s

Copyright @ ACTEX Publications 2007

Actuarial Mathematics: Solutions Manual for Exercises

Chapter 15 o 187

Exercise 15.7

ThelevelannualconfractpremiumG=aPr+cpaysforthefollowing(listedintermsoftheir
actuarial present value at issue):

Therefore,

An initial expense of eo. Annual expenses of (e, + ezPr)iir.


The cost of claim settlement

of q.A,.

Benefit of

A*
(aPr+c)ii" = * (q+qPr)ii,
+ er. A* + Ar.

Recallthat ^(, '

=#,h"n""(recalltlrat 4x'

= .4r+diir)

("+ * ")r,
aA* +

"o

*(",. rt)r"

q. A, + A,,
+ iir(er+deo),

cii* =

* erii, + erA, + qA, + A, = Ar(l+eo+er+er)

and we conclude that

a = l+eo+e2+%, c = e1+dq.
Exercise 15.8
We have, for

Z>

0,

t(r 61, a)
We assume that

"

= Bvr

+ a B a7 +

aa + p (B n + f)a7 - (B n + f)a7.

T(x) andB

are independent.

(a)

under the conditional equivalence principle ,

n(t(r{u),8)"lB - b) 0. Therefore,

o = n(r(r6y,a)"ln=t)

t(atf + aBaa + laa+ p(ar + f)an -(ao + y)aola = t) = s(t ' + abaa+ ilaa+ p(tn + f)afl-(tr + f)dn)
=
=
b-4 + abd* + 0d* + p(bn+

f)a. - (br+ f)a,.

Copyright @ ACTEX Publications 2007

Actuarial Mathematics: Solutions Manual for Exercises

Chapter 9
Exercise 9.1

(i)

Totaty anarogous to Exampre g.2.r. Aseries of tedious integration tricks:

/-#

*= *irnlr

=+

fi(s):

(ii)

#isadensiryon[0,oo)

I- [- qirrdtds : r';ri6,=T irn > 2 isajointdensityfor0(s,t(oo -'


EU

+ fs,r6r)= @, ,t\(n,-=?) ' (l+s+Dr


*l.rhus

(iii) From(i),Et(r+s)'l=
+

(iv)

sl: FL: I +EF] =+ E[^SJ H : EKt +,S)2J : | + 2Etsl+ E[^r2J can be used with E[^iJ to find E[^s2]

,r-tll c#

vffiirm<.n : T5 simitarly
=

Exercise 9.2

/,* /,*'a', l,*r#

dvdx

-n *

Exercise 9.3 Analogous to Example 9.2.3. Exercise 9.4

(a) Pr(T > n) = npry : ,px . npy,by independence. (b) Pr[T(x) ) n and W) S ,,.?, \y) ) n and Kx) < n] :
i
l

(c)

Pr [at least one survives]

np*(l-np) * ,py(l'-,pr)' :

: l-ngl,_:nPfi: ,p, 1rp, (d) Pr[T<n] : ,ery : 1 - npxt: r-npr.npy (e) Prfatleastone failsJ : 1 _ pr[bothsurvive] : I _,p*. npy. (0 Pr[I(x) 4 nand W)3n] : nQx.nQy: .(l_,p,)(t_,py) : I
- ,P" - ,py'*

: I - prfneither survivesl : I - pr{max[t\r),W)]<n]

npx

npy

_ 2.np".npy.

npx.npy

npx.npy.

16 o Chanter 9

Exercise 9.5 We seek nPx' n-tPy, which is Px' n-tPx+t ' n-rPy, 91 P*_n-lPxlty

Alternatively, npy-r

: Py-r'

n-rPytso that n-rPy

#,producing

nPx:y-r/py-t'

Exercise 9.6

Intuitively, tpo PoQ) is the p.d.f' of the R.V. T : T\xl). Thus the integral is PdT I n) - ,qo. Aninteresting algebraic approach is to note that p*(t) :2pr(t),and po: tPx.lpr. Then the integral becomes

,lo" *-(,p'p,'(t)) dt

/ 1 ^l'r : ,(-rdl|r), since P,F,Q) :


|

-ft,P,'

Thenwehave 1 - nP? :
Exercise 9.7

- rPu :

nQn.

T: IW),FrU): 1- S4,yr6,y(t, t): L - # (a) fr4): F[(t):


tf

fromproblem2 above

ffi

O) S1(t):l-F(r):dF (c) Elr@y)l: Io* tpxydt : lr* &

(s

:2t, ds :

2dt)

:
Exercise 9.8

Ir*

,61s" : th

(see solution to problem

l)

Analogus to the given example and equation (9.3.8).

Exercise 9.9.
tP-ry

- 1- tQx.tQy - 1 - (1 -rpJ(t -,P) : I : tP* * p, - P*'Py : tP, * tp, - ZtP''tPv I tP'v : tp, (l - ,py) * ,P, (l - tP) * tP"y.
= 1-tQ7

(1

-tP,-tPy*tP"'tPy)

Reasoningly, the event of at least one out of x and y surviving t years is obtained survives andy does not, or ify survives and x does not, or ifboth survive.

if

Erercise 9.10 Pr [at least onedies in (n +

: I - (1 -npx*,+e)(l-,py*,*ipr) : I - (l _n.lq,_,1q, I ,lq,.,lqr) : nlq, + nlq, - nlq,.,lq,


t

: I - Jt -

l) : I pr[xdiesintr+

r1]'{t _ rrgai"rirl"i

pr[neither dies in (n 1) +

rX}

the

y l ea is the probability that the second death out of


same event as above.

andy occurs in (z

l), which is not

Algebraically,

nlqy

nlq,

+ ,lqy - ,lq,y. Clearly ,lq,y *

,lq,.nlqy.

Exercise 9.11

(a) FrwG): tQo: tQxtQy: F4aQ)F49Q). fromproblem 1. NowfslG): F[oot!)

Now plug

in

FaaQ)

- 1and,#t.

o)
(c)

calculate

Etw)l

as

E[(-r)] + EVU)I
from (a)

nv@v)1. use problem s #7

u4Q)

: ##'

use results

Exercise 9.12 We seek tsp+0. We note tsPzs' 35p40

that

zspzs:so

zspzs

. zspso

5ep25. Furthennore,

soP2s,so that 35pas

: #,

: 3 :

?.

Exercise 9.13 We

will

need

p, :

e-[ip'6)as

eXp

: ex'
We will also make use of 1p*1t,(r)

[-

Ir'(1000

-, - "l-' a"l

lr,t*-'-",
Then rpqo

lr]

T0o=.

: TO#-. and,pastta(t) : # and, 75str5s!) : ,,10.'


rcpqo:so

f _ f6

and tPso

: 1- #,

- *B)(t _ *B) : eg # : (b) roPa*o: toPco* ropso- ropto:so:;8+f8-?:H


rcpq.rcpso

(a)

(t

(c)

The p.d.f. of

T:

Z(40:50) is

tp+o:so ttq,so(t)

tpqo

tpso?-tq(t)

+ pn?))
50, not
55).

: k k(#=7*#) :T5#,0<'<so it still r ( t<


(Note is
B+o,so

EtTf

: r#',/"nrs-t)dt: r+00
8ro,ro

: lf r-+rlr'] ,r.ou
t8.06
36.e4

(d) 8ao;m :

: fo* (t - .6) * (t - #) : (uo - fS}3) + (so - qf}l) - :


o, dt
fo'o

9qo

+ 8ro -

18.06

(e) Err2t:

tbo/" rlss-t1 at
:
E[72]

Then Var(Z)

"hf : {ttn}' : (486.1r; loto

fft'-inl,'] :
1ra.Oo;2

+se.rrrri
160.11.

(D Elr2f :

: tf$ * Gr+# - 486.1r1n :


Then Var(Z)

lo*

,rtaoo,

f no at

- +se.rrrri
ts47.22222.

1547.2222

pe.S+72

n2.66.
gae,

(g)

cov lr1+o:so), (40s0)]

: : '" :

8* 8ro
louo

goo,ro

{,

dnlo,

. {r- s6l dt - (t8.06)(36.s4)


fo'o

(30x2s)-(18.06x36.94)

82.86.

(h)

r4+oso;,44613n-q

Cov[(40:50),

var[(40:50)J.

va444651]

I(40:50)] :

y'(t6o.llxl82.66)

82.86

_ jcj<

Note:

These answers differ slightly from the text answers since we have rounded prior answers for use in later calculations.

140 o Chanter9

Exercise 9.17

ForZ:
,pl
and

(1,1), we seekPr(2 < T < 4). Now

- expl- I,' r(tf) *]

($)-' :

(s),,

- eXpl- Ir' (10-x-"1-'*] : t - #. we seek 2pr,r - 4pt:t: ef (8) - (.e)4(;) : ,%t - frtrE : ,?$fo :531/2000
,p{
Exercise 9.18

(a)

FrwQ)

Fq,rft)

FrelQ)

Fao{t)

:t*t- (2,-[n[t.ss])

:[rnlt.$$]
O)
Differentiate the answer above. Exercise 9.19

F4*1ror(5,s1:[hlt.W]
Exercise 9.20

(a)
o)
(c)

As

+ 0 (x)
sqx.

and7|O)) are independent so

sQ4

: :

sQy: (.05X.03)

.0015

If

a:

3, fromproblem 19

sQd:

.000266 .004232

If a

-3, fromproblem

19

srv:

Exercise 9.21

In general, dfr

au

du

auv,so

o@A

ctry

* ai -

a"y.nl

a4

* rlar.

This aruruity will pay until the first failure out of x andy, or until time n, whichever is later. Thus, it pays for nyearc for certain, and beyond that as long as the joint status (ry) survives.

Exercise 9.22 This insurance


V*r=,

will

pay atthe death ofx, or at time z, whichever is later.

7* +V;t -Vr,;1, where ZA

u n.

Altematively, Then

7.: x:nl

tetZ- J trt T) n
EI4 :
vn nQ,

(vn Tln

* - 9"'a-v'nP') * Ar-A*4*vn
Exercise 9.23

nl7,

yn -

: ," -

Zt,A

v, (l

- np")

Vn npx

Cov [v?@), ,r@Df

: : :

Efvr@t.rW)]
ElvT\n . urrDl

- n[vw]n[vw1
z[vzwtlnlvxvtl

: :
Exercise 9.24

nfvx,tlafvnt)] _ ZfvrootlnlrW)l due to independence 7: 7r-- Z7'VZ r ,: 7*'7, - (7, *V, -7r)7, 17, -71117, -Vr)

For 0

<t<

':n;r'";:'
aPv

20, the annuity will p.ay.if either is alive, since both are under age the annuitv wili pav onrv ir (25) i;

.ii*. iy tr,. .uo.nt p"y-r*

For technique of

50.

J,

f2o

vt ,pE,Ta O,

r25

Jro

vt

p25 dr

:
:
Exercise 9.25

l"

r, pzs dt

I'o

r: pso dt _

Azs,4

I'o

r, *2ssodt

dzo'fr1

dzs,to,q

and for

kr this case, the annyltf will pay for k 26,... if either is aiive.

/r

21,...,25 onlyif (30) is alive,

Thus apv

: tru b2l
oo

25

kho

+ iro *pxso
tol;
oo

: Dur kPn * f ,o kpzs t'r F2t n:ie


lF26

oorr,ro

zolazo

zslazs

zslazs,to

148 o

CamF l0

Exercise 10.4

,pg

p{l' p9' p[)

:
:
:

f'-nsl
ll

l-*)ll,-osl
+.os)l[1

(.02

,k[']

: ,qtl : et#--e
,p{l

(.93X.91X.89)

(.03 +.06)][1

(.04

+.07)]

.7s3207

.qtl

(.7s3207)(.0s)

.0376603s

: if# :
:
.3024.

Jrso4,usingthetableof Example 10.3.1

Exercise 10.5

(a)

Probability of graduation ir op[")

Then the number of graduates, G, is a binomial


R.IZ., with

p : .3024. ElGl:nP:302.4
1000,

V(G)

np(I

- p) :

210.95424

(b) Similarly, number of failures,4 is binomial with n : 1000, and p: 4qt): .15 * (.60X.10) + (.60X.70)(.05) : .231 ThenE[F] : np:231, V(F): np(l-p):177.639
Exercise 10.6

k
0

_a_
1000

al'

4)ql]) 2l
0

d?

: $ .q?)
250
120
63 33.6

I
2
3

600 420

"60

150

336

BT

res
:
.4666

(a) fie)

: aE#rl* :
T

.231

fi(z) :
(b) fi(i lk -

total others withdrawals

fi(3): q#:
2) . Pr(k

W:

so24

: 2) : Pr(termination at k : 2 iamodeT) Thenf(l lk : 2) : # : .25 andfl(Zlk : 2) : # : .75 Of coursef (3lk:2) : 0.

Excrcin f0.?
(a) From (10.4.1),

*) :'

-''*[-1,t, * &)dvf :;.*[-'+ k+]:


(b) 4D :
@)

* -l-[

p'U)

* rrot

ar]

(a-x1s-,

fo' tJ,r:r<,1o,

8)

: I'c{J,p!r)@at:
:'-'

lo'

: "*-, at "-x - "-x-l


Irt
e-*-t dt

: - (a - x - t) "--,l,to Erercise 10.8 Aga^,

fo'%lL:ry

:"; .:-; -:':l-"':'"-x I "-x-' -?


&*]
1000

*)

roooexp[-1,'"*
1000exp

[-* * n (' - *) - rn | :

e-d

-t

Erercise 10.9

(a) *,n9'

: -4& F)
dx

:-

:
(b)

*l,lry,ri', ,o,r.ff') :
Lry clx ltr)

og,[ug,a>

- r<,t1gf

t,u9

- 0.,
*)pa(,) *

bt,pP

*,ryff'l* (c-\*,)l,tatl

p?al

* ,oyt ro@) - pa(r)

(c) #,nP

: #W:

fi[4],rgatl:

,pg)pga>

{? r

Chanter

l0

Exercise 10.17

Firstwe

findpf)

:
: : :

[r

- n't"1 [t qr)

o'o'] [t

-f

o']

rhus,pf]

.76048, .85027,
.821,1,5,

.23952

pg
p{}
rlter_q]|/2

h\ qi; :

.t4973
.17885

q{} :

qt)

: ffi'mP',
:
.02054; .02578;

: - .87478166 tnp'S

.01767; qg)

.02665 qg) :
.031e3; q?l

.Igszo

Similarly, qt]

qzl :

.0s726

qg
Exercise 10.18

q?:

.03705; q?]:.11603

The result is direct, so no "solution" need be illustrated. The purpose of the exercise is to show the closeness of results to those of Exercise 16.

Exercise 10.19

(a) *',a on9) is justified by the constant force assumption. (b) Accepting that d.a x m9, *"n i d"r?:i6 = ; f :O. if r-l'lx r-2'Yx
uniformly

decrements are

distributed in both the single decrement tables and the multiple decrement model.

(c)

Clearly this leads to

4f) =
oglt

- i'qf)

,orto

(d) l,'1, d,alr

L nl'l:

- L n:,'1, which in turn implies

n9'

t'

og)

q9, or d,a

#
:

-q
'02073'etc'

Exercise 10.20

: 4* m'a:4
*9

v.e.,-tl:

cfu