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Apr 2017 q5

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dimitris13

Member
we know that if mortality is worse then SV will increase (prospectively) as Ax will increase and ax will decrease.
it says that if we understate longevity (so basically lighter mort) we will assume better mortality (ok so far) and will lead to higher SV being paid . why is that?

thanks
 
because the Q you reference is about surrendering an immediate annuity?

prospective SV for annuity = annuity benefit multiplied by ax + expenses multiplied by ax (with inflation)
[and no deduction for premiums as is single premium]

lower mortality -> higher ax -> higher SV

BTW I think you mean overstate longevity (= lighter mortality)?
 
u are right. after long hours of studying u mix up annuities with WL.
thanks again
D
 
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