CONFIDENTIAL CSIJUN 2014/ASC475 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE ACTUARIAL MATHEMATICS I COURSE CODE ASC475 EXAMINATION JUNE 2014 TIME 3 HOURS INSTRUCTIONS TO CANDIDATES 1, This question paper consists of five (5) questions, 2. Answer ALL questions in the Answer Booklet. Start each answer on a new page. 3. Do not bring any material into the examination room unless permission is given by the invigilator, 4, Please check to make sure that this examination pack consists of i) the Question Paper ii) an Answer Booklet — provided by the Faculty DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 5 printed pages (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 2 CSIJUN 2014/ASC475 QUESTION 4 ) You are given the following: © 3p, =0.92 and spy = 0.90; © Pe =0.91 and py = 0.85; © The two lives are independent. Calculate the probability that the eecond death occurs in the fourth year. (4.marks) b) Anna (50) and her sister Elsa (75) are both having independent lives, which mortality follows De Moivre's Law with w = 100. Calculate? _. (6 marks) ©) For two independent lives (35) and (45), you are given the following: sPas = 0.90; sPas = 0.80; dao = 0.03; so = 0.05. Calculate the probability that the last death of (35) and (45) occurs in the 6” year. (6 marke) @) You are given: © The future lifetimes of Tom (40) and Jerry (50) are independent; ‘* The survival function for Tom is based on a constant force of mortality, u = 0.05; ‘* The survival function for Jerry follows De Moivre’s Law with w = 110. ‘Calculate the probability that Jerry dies within 10 years and dies before Tom. (6 marks) QUESTION 2 2) Inatriple decrement model, you are given that: 123. Calculate E[TY = 3]. (8 marke) (© Hak Cipta Universiti Teknolog! MARA CONFIDENTIALCONFIDENTIAL 3 CSIJUN 2014/ASC475 b) For a double-decrement model, you are given: © a= Z.0st<50; © 4 =0.02,¢20. Calculate: ) wf (2 marks) ) 048? (2 marks) iil) fpr le) (2 marks) ¢) For a double-decrement table where cause 1=death and cause 2=withdrawal, you are given: * Deaths are uniformly distributed over each year of age in the single-decrement table; ‘+ Withdrawals occur only at the beginning of each year of age; + 1 = 1000; © qi? =025; a = 004d? Calculate qi. (6 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 4 CSIJUN 2014/ASC475 QUESTION 3 a) You are given: 2 6 =005, Calculate the following if (x) and (y) are independent. i) Ary (2 marks) ii) dy (2 marks) iil) PAzy) (2 marks) b) You are pricing a special 3-year annuity-due on two independent lives, Umar and Uthman both age 80. The annuity pays RM30,000 if both Umar and Uthman are alive and RM20,000 if only one is alive. Given the following table: k | ,Pe0 | 4 0.91 2 | 0.82 3 0.72 Calculate the actuarial present value of this annuity if i = 0.05. (6 marks) ) A population of 1000 lives age 60 is subject to 3 decrements, death=1, disal and retirement=3. Decrements are uniformly distributed over each year of age in the multiple decrement table. Given the following absolute rates of decrement: * 1 [a [o 60 [0.010 [0.030 | 0.100 61 [0.013 [0.050 | 0.200 Calculate the expected number of people who will retire before age 62. (8 marks) (© Hak Cipta Universiti Toknologl MARA CONFIDENTIALCONFIDENTIAL 5 CSIJUN 2014/ASC475 QUESTION 4 For the following assumptions,5 = 0.05, u{), = 0.025, u{9,, = 0.005, 44%"), = 0.040 for all t, wd, =0 for 0 25. Also given is the salary scale function with S, = e°°2*, If Adam (40) is earning RM25,000 annually, calculate the following: a) APV{, if RM1000 per year is contributed continuously while Adam is active; (6 marks) b) APV{ if 2% of salary is contributed continuously while Adam is still active prior to age 60; (6 marks) ¢) PV, assuming the annual benefit is 2% of salary for each year of service, Adam is a new hire, and a = 10 for all y = 65. (8 marks) QUESTION 5 a) For a fully discrete whole life insurance of RM100,000 on (35) with the following information: Premium expenses are 10% per year, Per policy expenses are RM25 per year, ‘Annual maintenance expense of RM2.50 for each 1000 of face value; All expenses are paid at the beginning of the year; 1000p35 = 8:36. Calculate the level annual expense-loaded annual premium, G using the equivalence Principle. (10 marks) b) Briefly explain the following types of nonforfeiture options: ‘+ Reduced paid-up insurance. ‘+ Extended term insurance. (10 marks) END OF QUESTION PAPER ‘© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL