Part i) Could you help in understanding from where the factor of 0.999 is calculated and from where 0.9987 is calculated? Part ii) Could you help in understanding in ii b) why no initial expense has and profit loading is included in calculation?
Hi Muskan The mortality rates used in this question are 0.1% and 0.13%. So the probabilities of survival are 0.999 and 0.9987. The reserve in part (ii)(b) is calculated just after the premium has been paid. so the initial expenses have already been paid - the reserve only considers future expenses. Reserves do not include a profit loading - the profit loading refers to the premium calculation. Best wishes Mark
