Nowhere in CMP find the formulae to calculate values of expenses and assurance function which increase compounding at the same rate of valuation interest. Eg. If epv to be calculated @ 4% interest then expense inflation or assurance function increase @ 4%. In some solutions it I used (1+ex) -nPx(1+ex+n) Query 1) what is ex? 2)what are the formulae for assurance and annuity functions in such case? Where can I find?
If the expenses and interest rate increase by the same percentage, the valuation interest rate (i prime) used becomes zero. This then leads to the summation of p's in the case of annuities or the summation of q's for assurances. The ex term you are questioning is the sum of kP(K=k), which you should be familiar with if you've taken ct 4 hope that helps
