EPV of Renewal expenses - non-annual premiums

Discussion in 'CT5' started by rsmallela, Mar 1, 2009.

  1. rsmallela

    rsmallela Member

    Age 30, term 20 years.
    Premiums payable quarterly in advance.
    Renewal expenses of 2% of all premiums except the first.

    If 'P' is the quarterly premium, then to evaluate EPV of this renewal expenses, what is the correct expression in terms of 'annuity due' functions??

    Thanks,
    Raj
     
    rsmallela, Mar 1, 2009
    #1
  2. Neetu Verma

    Neetu Verma Member

    I think,
    the EPV of revewal expenses
    =4*P*.02*a(4)30:20
    =4*P*.02* [ä(4)30:20-1/4]
    =4*P*.02*[ ä30:20-3/8(1-D50/D30)]
     
    Last edited by a moderator: Mar 3, 2009
    Neetu Verma, Mar 3, 2009
    #2
  3. rsmallela

    rsmallela Member

    Thanks

    I was a bit confused with expression given in solution for Q.11 in ASI Nov 2006 paper. Now I am clear ...in that question, the expenses start from beginning of year 2, for all monthly premiums. So, effectively, there are no expenses on premium for entire first year, not just the first monthly premium.

    Thanks for looking into this.

    Thanks,
    Raj
     
    rsmallela, Mar 4, 2009
    #3

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