Hi Can we split endowment assurances like how we split term assurances? Example for term n assurances; Ax (term n) = Ax (term t) + v^t . t_P_x . Ax+t (term n-t) Can we do the same for endowment / pure endowments? Or is the best way is to use annuity functions, then convert back using premium conversion formula? Thanks!!
Yes you can split them... But don't make life difficult unless there'sa specific reason like you have different assumptions over time.
Yes, I have different assumptions thats why. Back to the question, so when we split the endowment assurance, is the first part also an endowment assurance, or is it just a term insurance since the maturity benefit pertains only to the end of the period?
Yes the first bit is a term. Think of an endowment as a term plus a pure endowment, then split each of these as necessary, to get the concept and try to find the easiest way to get there.
Thanks didster. If you don't mind looking, here is what's bothering me. There is two set of assumption for interest rates; 4% for age up to 55 and 5% thereafter. I'm trying to split the endowment assurance using what I understand but I can't match the final answer to the solution. The solution used the annuity functions instead. The difference is 5%, so it can't be mere rounding error.
Without looking at any of the numbers, I'd say the last line of the "However" solution is incorrect as it uses d = 0.04/1.04, where you have different interest rates (ie not 4%) applying. Want to quote source of solution?
Thanks didster. It made sense to me though, coz it's 4% up to age 55, and 5% thereafter. It's actually assignment question X2.5 on my 2009 notes, and I am not sure if there is any correction. So embarrassed if there was.
