Hi there, In the questions it states "... Payable at the end of policy year of surrender" In the solution (from revision notes), it is using formula (aq),x,d = qx,d(1-0.5q,x,w). Why are they choosing this formula? As is pay at end, i would expect the formula to be (aq),x,d = qx,d(1-q,x,w). Please help. Thanks
The money is paid at the end of the year but it's not totally clear where the surrenders are actually occurring. The question says "The policyholder may surrender the policy, in which case a value equal to a fixed percentage of the total premiums paid on the policy is payable at the end of the policy year of surrender." The last bit of this sentence "at the end of the policy year of surrender" does imply, I think, that surrenders occur during the year. However, because the question is not totally clear (unless I have missed something?), if you had stated your assumptions, that the 6% surrender rate only occurs at the end of the year because that's when the surrender benefit is paid, I like to think that you would have scored full credit. John
