Super Compound Bonus - EPV

[Yunus Syed]

Hi.

Came across this question... what would be the best approach?
2 points specifically: addressing the super compound bonus and addressing the endowment return of premiums with 5% interest

Thanks in adv.

 

[Calm]

Hi.

Came across this question... what would be the best approach?
2 points specifically: addressing the super compound bonus and addressing the endowment return of premiums with 5% interest

While I work out the answer, a few things come into mind:
- Keep in mind that inflows to the policy must equal outflows from the policy at the 6% rate
- Inflows to the policy is simply the PV of premiums
- Outflows from the policy is the sum of PV of expenses and expected claims
- The sum assured will have the R 250k at 6% and the expected rate of bonus is some increasing annuity at 4%
- Take the premium as an unknown and try to get the PV of inflow equal to PV of outflow in terms of this premium
- Remember that the "endowment" part for surviving to 15 years will necessarily mean the maximum amount of premiums paid, the expected amount to pay for this is only affected by the probability that the life will survive 15 years