S
Sinead Mc Laughlin
Member
Hi,
I imagine this to be a simple answer but want to check as I couldn't find it in the notes.
In April 2010 Q1 (iii) the question is
"Over the past three years the company has declared regular bonuses of 1% p.a. using the simple approach. The actuary has determined that over the same period they could have declared 0.5% three years ago, 1% two years ago and 1.5% last year using the compound approach. (iii) Determine the benefit amount for a single premium policy written three years ago with a sum assured of 10,000, under both approaches. [2]"
And the solution is:
Simple Approach: = 10,000 + (1% * 10,000 * 3) = 10,300.00
Compound approach: = 10,000 * (1 + 0.5%) * (1 + 1%) * (1 + 1.5%) = 10,302.76
Are these derived from formulae? And what would the super compound answer be? Just not sure where the 3 comes from in the simple approach or why the compound adds 1 to each percentage?
Thanks in advance.
I imagine this to be a simple answer but want to check as I couldn't find it in the notes.
In April 2010 Q1 (iii) the question is
"Over the past three years the company has declared regular bonuses of 1% p.a. using the simple approach. The actuary has determined that over the same period they could have declared 0.5% three years ago, 1% two years ago and 1.5% last year using the compound approach. (iii) Determine the benefit amount for a single premium policy written three years ago with a sum assured of 10,000, under both approaches. [2]"
And the solution is:
Simple Approach: = 10,000 + (1% * 10,000 * 3) = 10,300.00
Compound approach: = 10,000 * (1 + 0.5%) * (1 + 1%) * (1 + 1.5%) = 10,302.76
Are these derived from formulae? And what would the super compound answer be? Just not sure where the 3 comes from in the simple approach or why the compound adds 1 to each percentage?
Thanks in advance.