apr 2013 q4 vs apr 2012 q1

[dimitris13]

the cost of the option is determined as
the xs (if any) of the value of the gteed annuity payments over the mat proceeds and multiplied with the option take up rate (apr 14)
or the option take up rate mult only with the annuity part? (apr 13)

thanks
D

 

[Lynn Birchall]

Hi dimitris

It's the excess (if any) of the value of the guaranteed payments over the LS maturity proceeds that is multiplied by the option take-up rate.

The same approach is actually adopted in the April 2013 solution too. The Examiners' Report has :
The cost of the option for each scenario is any excess of the present value of the guaranteed annuity payments over the lump sum benefit multiplied by the assumed probability of exercise at that age.

Hope this clarifies
Lynn

 

[dimitris13]

Hi dimitris

It's the excess (if any) of the value of the guaranteed payments over the LS maturity proceeds that is multiplied by the option take-up rate.

The same approach is actually adopted in the April 2013 solution too. The Examiners' Report has :
The cost of the option for each scenario is any excess of the present value of the guaranteed annuity payments over the lump sum benefit multiplied by the assumed probability of exercise at that age.

Hope this clarifies
Lynn

thanks lynn.

so it is sth like
(value of gtees payments- mat proc) × take up?

or value of gtees×take up -mat proc?

D

 

[Lynn Birchall]

Yes

 

[dimitris13]

the 1st right?

thanks again

 

[Lynn Birchall]

yes, the first