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

Discussion in 'CM1' started by yuli2513, Aug 25, 2021.

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  1. yuli2513

    yuli2513 Very Active Member

    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!
     
    yuli2513, Aug 25, 2021
    #1
  2. Joe Hook

    Joe Hook ActEd Tutor Staff Member

    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.
     
    Joe Hook, Aug 27, 2021
    #2
    yuli2513 likes this.

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