SOA Exam FAM Sample Question 6.53
Study guide: Exam FAM
A warranty pays 2000 at the end of the year of the first failure if a washing machine fails within three years of purchase. The warranty is purchased with a single premium, G, paid at the time of purchase of the washing machine.
You are given:
(i) 10% of the washing machines that are working at the start of each year fail by the end of that year
(ii) i = 0.08
(iii) The sales commission is 35% of G
(iv) G is calculated using the equivalence principle
Calculate G.
[Question 12 on the Spring 2017 exam]
- A) 630
- B) 660
- C) 690
- D) 720
- E) 750
Answer this question and see the worked solution