In Q12-(i) The 2V &1V all not to calculate the death benefit of the final year and only calculate the maturity benefit. Shouldn't 1*v^2 be used here? Is there any logic in it? Don't I need to calculate it? In Q13-(iii) Why should P be included in the calculation? I remember that the reserve at the end of the year has already included the P at the beginning of this year.What does this P mean? If it is the P at the beginning of the next year, it should be counted in the next year, right?
If you think about the profit in any particular year, say by using the profit testing process, profit includes: Premium paid(P) - expenses(E) + (P-E)*i + reserve @ start of year + interest on reserve - reserve @ end of year * (ap)x For the mortality profit calculation you need the reserve at the end of the year 17V. For calculating the interest rate that sets the profit to 0 we need the reserve at the start of the year 16V. We can then take this value, add on the premium paid at the start of the year and accumulate with interest. Hope this helps Joe
I thought it was the new formula for actual interest,but i still can't understand the relationship between it with original equation. How to connect " (16V+P)(1+i)-S*qx-px*17V " with marginal profit "(1425*qx-actual death amounts)(S-17V)"? [i'-0.06]*1425*(16V+P)=marginal profit It seems to tell me "i*(16V+P)*1425=(1425*qx-actual death amounts)(S-17V)". But after shifting the original equation, it becomes"i*(16V+P)*1425=-1425*(16V+P)+1425*qx*(S-17V)+1425*17V". How could it become from the original equation to "[i'-0.06]*1425*(16V+P)=marginal profit".
Having made a loss of c175k due to mortality, the company would need to make a profit of c175k on interest to offset it. Since interest within the year only affects P and tV in this case, because there's no expenses, they need to make a profit on interest being higher than expected. Expected interest is (P+tV)*1425*6%. Actual interest income will be equal to (P+tV)*1425*i'. So profit from interest income will be equal to [i'-0.06]*1425*(16V+P)
I missed "After an analysis of surplus investigation by the company, it found that it had made neither a profit nor a loss in 2016 in respect of the policies in part (ii).", thanks for your answer to remind me it.
