SOA Exam FAM Sample Question 7.4

Study guide: Exam FAM

For a special fully discrete whole life insurance on (40), you are given:

(i) The death benefit is 1000 during the first 11 years and 5000 thereafter

(ii) Expenses, payable at the beginning of the year, are 100 in year 1 and 10 in years 2 and later

(iii) $\pi$ is the level annual premium, determined using the equivalence principle

(iv) $G = 1.02 \times \pi$ is the level annual gross premium

(v) Mortality follows the Standard Ultimate Life Table

(vi) $i = 0.05$

(vii) $_{11}E_{40} = 0.57949$

Calculate the gross premium policy value at the end of year 1 for this insurance.

[A modified version of Question 18 on the Fall 2012 exam]

Concepts tested