Chapter 5 question

Can anyone explain in more detail the last line of the derivation of the formula for net premium reserves on page 30? I understand it right up until the last step, when it says "Since the net premium and net premium reserve are both calculated using the same basis, the formula for the net premium reserve simplifies to..."

 

Reserves

I refer to 2008 material...and I guess you are referring to the section calculating net premium reserves for endowment assurances... (it is on p-24 in my material). if this is not the one you referred to, please let me know...

You can expand the second term. That gives you two terms a x+t:n-t/a x:n
(dots on 'a' continues..i could not put them here..), and another term (d x a x+t:n-t). This last term is same as second term, but only when bases for reserve and premium calculations are same. For example, if interest basis is different in reserve and premium calculations, then value of 'd' differs and so those two terms would not be same. So, you need that assumption of same bases to cancel two terms leaving the other two terms in final result.

please discuss if i was not clear...it is a bit hard to explain without putting notations...!!!! I did scan a manuscript, but size limitations of the forum does not allow me to attach it !!

Thanks,
Raj

 

you can attach an image

you need a image hosting site I use image shack http://imageshack.us/
you have to register im afraid but it only takes a minute , not going to say if its any good but it does the job i require it for , ie putting up images on forums i frequent

proof http://www.acted.co.uk/forums/showthread.php?t=2462

and to the original poster , I will scan in an explanation later , but come on its just multiply out the 2nd last line and then canceling what needs to be canceled ( and stuff will only cancel if they are truly the same so same basis )

edit : just realized your the person who I suggested to , "dont need ct4 for ct5 " hows it going?


edit : image
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tough ole chapter this is ,had me a tread moaning bout it awhile back , and it gets worse too

 

Thanks so much! It wasn't so hard afterall

Yes I agree that you don't need CT4 to do CT5, but I actually got the notes for CT4 in the end. Haven't decided which exams I'm going to do yet eeek. Have understood the material so far for CT5 (pretty much) but finding the questiona nd answer banks really difficult. Hardly ever get them right without cheating! Hopefully will improve with practise...