1 Life Insurance (50') The following table present the cash flow arrangement of a life insurance (including critical illness) policy. Use the information in the table to answer the following questions. Assume all premiums are paid at the beginning of each year, and all payments (death benefit and surrender value) are paid at the end of each year. PRUmyhealth lifelong crisis protector 0 IMPORTANT: THIS IS A SUMMARY ILLUSTRATION OF THE BENEFITS OF YOUR POLICY AND IN NO WAY AFFECTS THE TERMS AND CONDITIONS STATED IN THE POLICY DOCUMENT, Name : Mr. Chan Tai Man Age Next Birthday (ANB) : 45 Sex : Male (Non-smoker) Initial Sum Assured : US$ 128,000 Initial Annual Premium : US$ 4,879.36 Benefit Term : Whole Life Premium Term : 20 years Basic Plan - Illustration Summary (Currency: US$) Surrender Benefit Major Disease Benefit / Death Benefit Guaranteed Sum Assured Cash Value of PRUmyhealth Face Value of Guaranteed Non-Guaranteed lifelong crisis Free 10-year Non-Guaranteed End of Cash Value Terminal Bonus Total protector crisis cover Terminal Bonus Total Total Policy Year (A) (B) (A)+(8) (C) (D) (E) (C)+(D)+(E) Premiums 1 0 0 128,000 44,800 0 172,800 4,879 2 0 128,000 44.800 0 172,800 9,759 3 366 0 366 128,000 44.800 0 172,000 14,638 976 976 128,000 44.800 172,800 19.517 1,830 383 2.213 128,000 44.800 1,276 174,076 24,397 2,928 743 3,671 128.000 44,800 1.508 174,308 29.276 4,269 1.262 5,531 128,000 44,800 1,748 174,548 34,156 5.855 2.152 8.007 128,000 44.800 2.152 174,652 39,035 7,685 3,395 11,080 120,000 44,800 3,395 176,195 43.914 10 9,759 5.006 14,765 126,000 44.800 5.006 177,806 48,794 11 12,076 6,320 18,398 128.000 0 31.441 159.441 53,673 12 14.638 7,951 22.589 128.000 O 34874 162,874 58,552 13 19,030 10,059 29,089 128,000 0 38,392 166,392 63,432 14 23,909 12.640 36.549 128.000 41,994 169,994 68.311 15 29.276 15.945 45,221 128,000 173,687 73,190 20 63,432 50,222 113,664 128.000 69.271 197.271 07587 25 87,828 72,655 160.483 128,000 97 917 225,917 97,587 30 92,703 103,929 196,637 128,000 133,413 261,413 97,587 RANB65 63.432 50,222 113,654 60,271 197,271 97,587 @ANB 70 87,823 72,655 160483 128,000 97,917 225,917 @ANB 75 92,708 103,929 196,637 128,000 133,413 261,413 97,587 ANB 80 97,587 146,377 243,964 128,000 177,212 305,212 97,587 ANB 85 128.000 226,400 354,400 226 400 354,400 97,587 DANB 90 128,000 291,104 419.04 128,000 291,104 419,104 97,587 @ANB 95 128,000 406,312 534,312 128,000 406.312 534,312 97,587 MANB 100 128.000 548,086 676,088 128.000 548.086 675,086 97,587 Notes (1) The above is only an illustration summary of the major benefits of your policy. You are advised to contact your consultant or the Company for more information on this plan. This illustration in no way affects the terms and conditions stated in the Policy Document (2) The above illustration relates only to your Basic Plan excluding any riders or additional benefits (if applicable). (3) The above values are for illustrative purposes only and assume that all premiums are paid in full when due; (Ino Advanced Claim has been paid; and () the Sum Assured of your Basic Plan remains unchanged throughout the Benefit Term. (4) Terminal Bonus is a one-off bonus payable upon payment of Major Disease Benefit (except for Advanced Claim), Death Benefit or upon termination of the policy, if any of them occurs from the 5th policy anniversary onwards. The face value of Terminal Bonus will be paid when the Company is paying the Major Disease Benefit or Death Benefit, but only the cash value of Terminal Bonus will be paid when the policy is surrendered in whole or in part. These values are determined and calculated based on the Company's experiences and the current projections of surrender values and bonus scales in relation to a number of factors including, but not limited claims, persistency and investnent assumptions. Hence, the values are not guaranteed and are subject to review and adjustment at the absolute discretion of the Company. You should note that the actual values payable under the policy may differ significantly from the above illustrated values. (5) The Company reserves the right to review the premium rates on each policy anniversary and adjust the premium rates accordingly across a particular risk class. 15,687 128,000 97,587 128,000 3. Policy surrender and policy loans. (15') Suppose Mr Chan has paid premium on time for 15 years. He retired at 60 and his income experienced a large drop. He cannot fulfill the next 5 years of premium payment requirement. He has two options. Option 1: surrender the policy at 60. Option 2: pay 5 more years of premium using policy loans. (a) What is the surrender value of Option 1 (assuming the projected non-guaranteed ter- minal bonus is realized)? (5') (b) Suppose the policy loan requires an interest rate of 5%. What is the cash value that he can receive after he uses policy loan to pay for 5 additional years of premium and surrender at age 65 (assuming survival and no major diseases)? (5') (C) Suppose Mr Chan dies at 65. What is the benefit that the beneficiary can get if Mr Chan chooses option 1 and option 2, respectively at 60? (5') 1 Life Insurance (50') The following table present the cash flow arrangement of a life insurance (including critical illness) policy. Use the information in the table to answer the following questions. Assume all premiums are paid at the beginning of each year, and all payments (death benefit and surrender value) are paid at the end of each year. PRUmyhealth lifelong crisis protector 0 IMPORTANT: THIS IS A SUMMARY ILLUSTRATION OF THE BENEFITS OF YOUR POLICY AND IN NO WAY AFFECTS THE TERMS AND CONDITIONS STATED IN THE POLICY DOCUMENT, Name : Mr. Chan Tai Man Age Next Birthday (ANB) : 45 Sex : Male (Non-smoker) Initial Sum Assured : US$ 128,000 Initial Annual Premium : US$ 4,879.36 Benefit Term : Whole Life Premium Term : 20 years Basic Plan - Illustration Summary (Currency: US$) Surrender Benefit Major Disease Benefit / Death Benefit Guaranteed Sum Assured Cash Value of PRUmyhealth Face Value of Guaranteed Non-Guaranteed lifelong crisis Free 10-year Non-Guaranteed End of Cash Value Terminal Bonus Total protector crisis cover Terminal Bonus Total Total Policy Year (A) (B) (A)+(8) (C) (D) (E) (C)+(D)+(E) Premiums 1 0 0 128,000 44,800 0 172,800 4,879 2 0 128,000 44.800 0 172,800 9,759 3 366 0 366 128,000 44.800 0 172,000 14,638 976 976 128,000 44.800 172,800 19.517 1,830 383 2.213 128,000 44.800 1,276 174,076 24,397 2,928 743 3,671 128.000 44,800 1.508 174,308 29.276 4,269 1.262 5,531 128,000 44,800 1,748 174,548 34,156 5.855 2.152 8.007 128,000 44.800 2.152 174,652 39,035 7,685 3,395 11,080 120,000 44,800 3,395 176,195 43.914 10 9,759 5.006 14,765 126,000 44.800 5.006 177,806 48,794 11 12,076 6,320 18,398 128.000 0 31.441 159.441 53,673 12 14.638 7,951 22.589 128.000 O 34874 162,874 58,552 13 19,030 10,059 29,089 128,000 0 38,392 166,392 63,432 14 23,909 12.640 36.549 128.000 41,994 169,994 68.311 15 29.276 15.945 45,221 128,000 173,687 73,190 20 63,432 50,222 113,664 128.000 69.271 197.271 07587 25 87,828 72,655 160.483 128,000 97 917 225,917 97,587 30 92,703 103,929 196,637 128,000 133,413 261,413 97,587 RANB65 63.432 50,222 113,654 60,271 197,271 97,587 @ANB 70 87,823 72,655 160483 128,000 97,917 225,917 @ANB 75 92,708 103,929 196,637 128,000 133,413 261,413 97,587 ANB 80 97,587 146,377 243,964 128,000 177,212 305,212 97,587 ANB 85 128.000 226,400 354,400 226 400 354,400 97,587 DANB 90 128,000 291,104 419.04 128,000 291,104 419,104 97,587 @ANB 95 128,000 406,312 534,312 128,000 406.312 534,312 97,587 MANB 100 128.000 548,086 676,088 128.000 548.086 675,086 97,587 Notes (1) The above is only an illustration summary of the major benefits of your policy. You are advised to contact your consultant or the Company for more information on this plan. This illustration in no way affects the terms and conditions stated in the Policy Document (2) The above illustration relates only to your Basic Plan excluding any riders or additional benefits (if applicable). (3) The above values are for illustrative purposes only and assume that all premiums are paid in full when due; (Ino Advanced Claim has been paid; and () the Sum Assured of your Basic Plan remains unchanged throughout the Benefit Term. (4) Terminal Bonus is a one-off bonus payable upon payment of Major Disease Benefit (except for Advanced Claim), Death Benefit or upon termination of the policy, if any of them occurs from the 5th policy anniversary onwards. The face value of Terminal Bonus will be paid when the Company is paying the Major Disease Benefit or Death Benefit, but only the cash value of Terminal Bonus will be paid when the policy is surrendered in whole or in part. These values are determined and calculated based on the Company's experiences and the current projections of surrender values and bonus scales in relation to a number of factors including, but not limited claims, persistency and investnent assumptions. Hence, the values are not guaranteed and are subject to review and adjustment at the absolute discretion of the Company. You should note that the actual values payable under the policy may differ significantly from the above illustrated values. (5) The Company reserves the right to review the premium rates on each policy anniversary and adjust the premium rates accordingly across a particular risk class. 15,687 128,000 97,587 128,000 3. Policy surrender and policy loans. (15') Suppose Mr Chan has paid premium on time for 15 years. He retired at 60 and his income experienced a large drop. He cannot fulfill the next 5 years of premium payment requirement. He has two options. Option 1: surrender the policy at 60. Option 2: pay 5 more years of premium using policy loans. (a) What is the surrender value of Option 1 (assuming the projected non-guaranteed ter- minal bonus is realized)? (5') (b) Suppose the policy loan requires an interest rate of 5%. What is the cash value that he can receive after he uses policy loan to pay for 5 additional years of premium and surrender at age 65 (assuming survival and no major diseases)? (5') (C) Suppose Mr Chan dies at 65. What is the benefit that the beneficiary can get if Mr Chan chooses option 1 and option 2, respectively at 60? (5')