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5.(2 points) For a special fully discrete 30-year term insurance on (40): (i)...

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Finance

5.(2 points) For a special fully discrete 30-year term insurance on (40):
(i) The force of mortality is \mu x =0.0001(1.07x ).
(ii) i =0.04.
(iii) The death benefit is 10,000 in the first 15 years and 5,000 afterwards.
(iv) Death benefits are paid at the end of the year of death.
(v) Premiums are paid quarterly for at most 10 years.
(vi) Annual expenses are:
Year Per premium Per policy
First year 30%8.00
Renewal 3%0.70
(vii) Per premium and per policy expenses are payable at the beginning of each year. Per premium ex-
penses are calculated based on the sum of premiums scheduled to be paid during the year.
Using a spreadsheet, calculate the annual gross premium using the equivalence principle.

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