SOA Exam FAM Sample Question 6.9
Study guide: Exam FAM
For a fully discrete 20-year term insurance of 100,000 on (50), you are given:
(i) Gross premiums are payable for 10 years
(ii) Mortality follows the Standard Ultimate Life Table
(iii) i = 0.05
(iv) Expenses are incurred at the beginning of each year as follows:
| Year 1 | Years 2-10 | Years 11-20 | |
|---|---|---|---|
| Commission as % of premium | 40% | 10% | Not applicable |
| Premium taxes as % of premium | 2% | 2% | Not applicable |
| Maintenance expenses | 75 | 25 | 25 |
(v) Gross premiums are calculated using the equivalence principle
Calculate the gross premium for this insurance.
[A modified version of Question 9 on the Fall 2013 exam]
- A) 617
- B) 627
- C) 637
- D) 647
- E) 657
Answer this question and see the worked solution