April 2015 Q10 ii

[Harashima Senju]

Hi guys, for some reason I can't wrap my head around this solution. Any help would be appreciated

1. What is the reasoning behind calculating ¯a 40:50:20 and ¯a40:50:30?
2. Why do we find a proportion between the the above values for the initial level annual premium?

 

[Mohit Gulati]

since premium has been broken as follows
for first 20 years it is 1 then it reduced to 0.75

so for first 20 years it acts like this (0.25+0.75) and then in the last 10 years it is 0.75
¯a 40:50:20 *0.75 and ¯a40:50:20*0.25 = ¯a 40:50:20 *1?

and for the last 10 years = ¯a 40:50:30 *0.75 which is being covered by ¯a 40:50:30 *0.75

 

[Harashima Senju]

crystal clear but I had to draw a timeline to see it. Is this how you do it or you now have the vision to see how to do it in the exam. Thanks Mohit

 

[Mohit Gulati]

in some cases i also make the time line, where the things are not possible on hands, but here
we have other ways of doing as well its not the only way to do it. so may be if i adopted
another way, so time line may not be required, let me tell you while giving the exam we
are in quite hurry so sometime vision not work than time line, but if the vision is working
continuously during the exam, then vision saves time which is used in making the time line.

 

[Harashima Senju]

Thanks I thought something was wrong with me. Time is a major headache