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TB- vary with duration

Discussion in 'SA2' started by yogesh167, Feb 28, 2019.

  1. yogesh167

    yogesh167 Member

    Hello

    Please refer to attachment (from SA2 study material pg5 of ch3), I could not understand the reason in the part (b) of the question that why terminal bonus is likely to vary with duration for format(a)?

    Please explain, thanks in advance..
     

    Attached Files:

    yogesh167, Feb 28, 2019
    #1
  2. Em Francis

    Em Francis ActEd Tutor Staff Member

    Hi
    Total reversionary bonuses (format (b)) might be a reasonable proxy to duration as reversionary bonuses are built up over time. However, format (a) includes % of sum assured and the amount of sum assured doesn't reflect duration of policy, rather it is set at outset.

    Does this help?
    Thanks
    Em
     
    Em Francis, Mar 6, 2019
    #2
  3. yogesh167

    yogesh167 Member

    Yes Em, I completely agree with what you are saying but sorry to say I am unable to connect it with how does it answer my query of TB varying more by duration in case of % of (SA + RB) instead of total RB only.

    Please help me to understand the same.
     
    yogesh167, Mar 7, 2019
    #3
  4. Em Francis

    Em Francis ActEd Tutor Staff Member

    Hi

    This is because it includes the sum assured which doesn't vary with duration.
     
    Em Francis, Mar 8, 2019
    #4

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