Rounding difference when calculating whole life assurance for last survival payable immediately

[yuli2513]

Hi,

When doing the 2nd question 11 (page 8 for question, page 54 for answer) from CM1 ASET 2016 April paper, I noticed a very large rounding difference when applying different methods to calculate the whole life assurance for last survival payable immediately.

I used a method different from what's given in the answer:
- I first calculated the 'last survivor annuity payable continuously' with the formula ('last survivor annuity due' - 0.5), and I obtained 16.146
- Then I applied the premium conversion relation and calculated the 'whole life assurance for last survival payable immediately' as (1 - delta * 'last survivor annuity payable continuously') and I got 0.36674

The answer follows another method and the suggested answer is 0.366894.

The rounding difference seems to be quite large here. I am wondering if this is a concerning point for the exam and if there is a rule of thumb that I should follow for similar calculations.

Thanks in advance for looking into this!

 

[Joe Hook]

The difference here is in the 4th decimal place so I'd suggest it's still a fairly small rounding difference we're talking about here. They will happen depending on approach as you've experienced here. No rule of thumb here as such. Pick your approach and retain a good number of decimal places in your calculation. Ideally you'd perform your calculations in excel and then everything is to full accuracy.