Hi All! While working out April 2010 question paper, Q.13 (unit-linked endowment assurance contract), I got the following doubt: The dependent rate of mortality has been taken as equal to the the independent rate (AM92 select). Can anyone tell the reason for the same? Why the conversion formula has not been used? Thanks in advance Jhanani
Because surrender can only be done at the end of 1st 2nd policy years. So any policyholder can't die in same year of surrender. That's it. PS: I hope you know calculation methods for finding dependent probabilities has been changed from 2015 diets. Anyways new methods doesnt alter the solution of Q13
From 2015, dependent rate calculated by considering same and constant force of mortality as independent rates per year of age. Previous, there were different methods, so you should ignore that Qs from before 2015 papers.
If you have ActEd notes of 2015 or 2016, then you can see the way to solve in Chapter 10. That's very long explanation.
A large industrial company recruits a constant number of school leavers aged exactly 18 years on 1st July each year. Upon joining, workers undergo training for one year. Of those who complete this period of training, ten percent fail a final test of competence and are dismissed. Employees may also leave service voluntarily at any time. The independent rate of voluntary withdrawal from service is 0.15 for trainees and 0.10 at each age for fully trained employees. The occupation is hazardous and all workers, including trainees, are exposed to the risk of injury. The independent rate of injury is 0.05122 at age 18 and 0.05003 at ages 19 and above. An employee who is injured is transferred to alternate work with a subsidiary company, at a relocation cost of Rs 1000. The independent mortality rate for all employees aged 18 is 0.00112, for aged 19 is 0.00117 and for aged 20 is 0.00119. The number of employees attaining age 21 each year is 500. (1) Construct a service table covering the first 3 years of employment with the original company, distinguishing between those about to take the final test of competence and those who pass it. [Note: Regard failing the test as a special mode of decrement] the following formula was used to calculate dependent probab: (aq) d x = q d x [1 – 1/2 (q w x + q i x ) + 1/3 q w x q i x ] where d is death, w is withdrawal and i is injury this was a formula used in nov 2010 iai paper question 3 is it no longer applicable now?
okkkayy... in my understanding to calculate dependent probabilities we use independent probability and find the mu then we use taht mu in the (aq)x formula where (au) is equivalent to mu . am i correct?