An annual premium with-profits, 25 year term, endowment assurance policy is issued to a life aged 35. The initial sum assured is £50,000.The death benefit of the sum assured and attaching bonuses is payable at the end of the year of death. The office declares compound reversionary bonuses (3%pa declared annually in advancefor each year of the contract). Find the net premium reserve at the end of the 5th policy year. Basis: AM92 Select mortality, 4%pa interest In the solutions, the net premium is found using assurance and annuity functions based on the select mortality basis. ("[35]:25¬") So why is the reserve calculation at end of 5th year not based on the select mortality assurance and annuity functions? (It uses "40:20¬")
I think the select period for AM92 is only 2 years so that after 5 there is no longer a select effect. This should answer both your posts.
