(10 points)CTI is a life insurance company that plans to issue a new, high volume, low sum insured term insurance policy through direct marketing.Its current business is predominantly traditionally-brokered term insurance.

CTI assumes the following for calculating premiums and reserves.

(i) For brokered policies, mortality follows the Standard Ultimate Life Table, and expenses are 8% of each premium.

(ii) For direct-marketed policies, mortality follows the Standard Ultimate Life Table with a 5-year addition to the policyholder's age.Expenses are 3% of each premium.

(iii) i = 0.05

(iv) Premiums are calculated using the equivalence principle.

(3 points)

(i) Show that the standard deviation of the present value of the benefit is 4088 to the nearest 1.You should calculate the value to the nearest 0.01.

(ii) The standard deviation of the gross loss-at-issue is 4088.5. Without further calculation, explain why the standard deviation of the gross loss-at-issue is very close to the standard deviation of the benefit.