2. [15 marks] For the scenario described below, calculate the profit signature, the discounted payback period and the net present value, using a hurdle interest rate of 10% per year effective for the policy described in question 1. Policy remained inforce for 15 years Premiums of $3500 are paid for 5 years and no premiums are paid thereafter The COI rates and expense charges are unchanged from question 1 The face amount is unchanged The insurer has earned 9.25% each year on their funds The credited interest rate (and rate used for discounting COI amounts) for the UL account value is calculated using a spread approach. The insurer keeps the first 2.5% and pays the remainder to the policyholder. Actual mortality was 80% of the Stats Canada rates Incurred expenses were $1000 at inception plus $85 plus 6.5% of premium each year There was a cost of surrender of $40 even if there was no cash value paid out, and a death expense of $150. Surrenders occur at year end with probability of 5% in year 1 then increasing by 5% each year to year 14 and jumping to 100% in year 15. The insurer holds the full account value as a reserve for this contract.