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Q&A Bank 1: Question 1.23 i)

C

Csimpi

Member
I don't understand the first equation of the solution to this question.

According to Chapter 1, Section 8.4, the endowment assurance function is the sum of an n-year Term Assurance with benefit payable immediately on death and a pure endowment with n-year term.

Hence, going back to the solution of the question, I don't understand why the EPV of the endowment assurance function is expressed as the sum of two other EPV functions, the second of which is "A bar" (since this does not correspond to a pure endowment with n-year term). Can someone clarify what is going on here please?

P.S. Due to the notation used in CT5, it is really difficult to post questions clearly. Does anyone know of a package that can be used to insert the actuarial symbols used in the course into questions?
 
I (like many others on this forum) don't have a copy of the current CT5 notes.

You are therfore more likely to get a response if you post a bit more detail. Granted it is difficult to "type" actuarial notation but possible solutions are:

  1. Try typing the notation, eg a bar x; n|A (Arrears) x:y (joint) {this maybe a bit tedious and still confusing}
  2. write out symbols in words
  3. if you have access to a scanner, use a pen and paper and post a scanned image. I've seen this done and it seems like the best way. I suppose using paint is also possible if you don't have a scanner.
 
A bar or not A bar

Putting a bar over the A for a pure endowment wouldn't mean anything.
A pure endowment pays £1 if you survive until time n. It is ALWAYS paid at time n.
With a term assurance when there is no bar, the £1 is paid at the end of year of death. Putting a bar there makes it paid immediately on death. Same for an endowment assurance, just remember that when you split it up, the pure endowment bit doesn't need a bar.

In terms of questions being difficult to post because of notation.

If you really can't think of a way to get your question down in writing, I'm very happy to try and help over the phone,

John Potter
01707 275776
 
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