Actuary@22
Very Active Member
Hi
I have a few doubts in Ch 18 EV as per Acted 2019 no0tes:
1.On pg8,didn't understand the concept of subtracting PV of future releases of required capital from here
Cost of required capital = Amount of required capital –
PV (future releases of the required capital, allowing for
investment return)
2. On pg11,What does fund exactly mean here?
use bonus rates that are calculated to extinguish the fund – this approach places an
implicit value on any free estate.
3. On pg 20,didn't understand if both discount rate and expected investment return are risk free so how does the following statement hold true?
In these circumstances, a risk-neutral market-consistent EV would be expected simply to increase
by the risk-free return each year. This is because the expected investment return and discount
rate should both equal the risk-free rate.
I have a few doubts in Ch 18 EV as per Acted 2019 no0tes:
1.On pg8,didn't understand the concept of subtracting PV of future releases of required capital from here
Cost of required capital = Amount of required capital –
PV (future releases of the required capital, allowing for
investment return)
2. On pg11,What does fund exactly mean here?
use bonus rates that are calculated to extinguish the fund – this approach places an
implicit value on any free estate.
3. On pg 20,didn't understand if both discount rate and expected investment return are risk free so how does the following statement hold true?
In these circumstances, a risk-neutral market-consistent EV would be expected simply to increase
by the risk-free return each year. This is because the expected investment return and discount
rate should both equal the risk-free rate.