SOA Exam FAM Sample Question 7.19

Study guide: Exam FAM

For a fully discrete whole life insurance of 100,000 on (40) you are given:

(i) Expenses incurred at the beginning of the first year are 300 plus 50% of the first year premium

(ii) Renewal expenses, incurred at the beginning of the year, are 10% of each of the renewal premiums

(iii) Mortality follows the Standard Ultimate Life Table

(iv) $i = 0.05$

(v) Gross premiums are calculated using the equivalence principle

Calculate the gross premium policy value for this insurance immediately after the second premium and associated renewal expenses are paid.

[A modified version of Question 18 on the Spring 2015 exam]

Concepts tested