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Chapter

4.73

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

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'

is. ,.

271

,bo,iol

- -

d*lo='^

ldr-_#

0.063803.

0.055321.

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)

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* =
Copyright @ ACTEX publications 2007

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 =

80

Chapter 4

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

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

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*# .

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

,r=o

\.r=o

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

,t=0 6

*t

[iu.r.*
+

*l

*n*r)
oln.,f) =

&=0

Iro "

olq*

[F,,'

;)'I-#

*) =t,*.'

h}r*'*lQ,

j;4'

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

-*)".

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.

_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.

= 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) = [10J
Copynght @ ACTEX Publications 2007

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

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,

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(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).

Cbapter 5

99

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,

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 "-+

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,,

= tf) 'o,
['
=

,f,

.o,

.^"#(-[,.#)

,f,)

= tf)o**

t,fi

(t-"i-,)

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

,=

{Y'F*EI, K>n.

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.

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*.

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

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

Exercise 6.6

If the force is constant, then

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

#g,

and

')-

U .,, - p+26.

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

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).

"= (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).

Exercise 6.10

z:s"iol

rcEts'
rcEE

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

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

rcEzs,
rcEgs

P(zrr,rr)

Ats.n-=i

+ roErs) '

__ 5s:iol :
D

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

,o4u-P.1a

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

zoP(zolrc4).

= 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

Copyright @ ACTEX Publications 2007

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

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

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

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

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),

FuIIy-Disoete:

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

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

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

Tlrl:.s

n](1

* i) :

sV:0,

we find

+;) :

r'i1,etc.

pV

n.

Exercise 8.10

: 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)

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

1z : (o^ -

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'

spx+k.

k+sv :
*
vr-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

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)

1.645

s,3rt,37s

as

before

\ffi

(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

(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

Var (62)

(b^*t

r,+rY)

Qx+h' hPx

.216
.7584

Ao

* I Ar :

.6084
-27

+ .69M4 (.216) :

(d)

Var(12)

: 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):

of

0.40G + 0.0sG\",l,sl

0.35G + 0.O5Gajao1iol.

of 0.02G\+o1lil.
of 12.50+

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

0.935n =
and

2.50 +

2.50ii,s+

10001-

.r,

Actuarial Mathematics: Solutions Manual for Exercises

Chapter 15 o 187

Exercise 15.7

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* =

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+

Chapter 9
Exercise 9.1

(i)

/-#

*= *irnlr

=+

fi(s):

(ii)

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

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

(s

:2t, ds :

2dt)

:
Exercise 9.8

Ir*

,61s" : th

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

: 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

Algebraically,

nlqy

nlq,

,lq,.nlqy.

Exercise 9.11

Now plug

in

FaaQ)

- 1and,#t.

o)
(c)

calculate

Etw)l

as

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

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=.

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 :

o, dt
fo'o

9qo

+ 8ro -

18.06

(e) Err2t:

tbo/" rlss-t1 at
:
E

Then Var(Z)

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

+se.rrrri
160.11.

(D Elr2f :

Then Var(Z)

lo*

,rtaoo,

f no at

- +se.rrrri
ts47.22222.

1547.2222

pe.S+72

n2.66.
gae,

(g)

: : '" :

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

- 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.

V*r=,

will

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

Thus apv

: tru b2l
oo

25

kho

+ iro *pxso
tol;
oo

lF26

oorr,ro

zolazo

zslazs

zslazs,to

148 o

CamF l0

Exercise 10.4

,pg

:
:
:

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.

Exercise 10.5

(a)

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 -

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),

*) :'

(b) 4D :
@)

* -l-[

p'U)

* rrot

ar]

(a-x1s-,

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

8)

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

lo'

Irt
e-*-t dt

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,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)

4f) =
oglt

- i'qf)

,orto

L nl'l:

n9'

t'

og)

q9, or d,a

#
:

-q
'02073'etc'

Exercise 10.20

: 4* m'a:4
*9

v.e.,-tl:

cfu