2. (9 points) A 3-year endowment insurance is issued to 60). The policy has the following details: (i) Face amount is 250,000 (ii) Mortality follows the LTAM Table (iii) Pre-contract expenses are 500 (iv) Commissions are 8% of each premium (v) The hurdle rate is 15% (vi) Policy reserves are oV = 0,1V = 75,000, 2V = 160,000 (vi) Annual premium is 80,000 (vii) Earned interest rates for the policy are 8%, 10% and 12% in the first, second and third years, respectively. (a) (4 points) Calculate the expected profit vector for the policy. (b) (3 points) Calculate the profit signature and NPV for the policy. (c) (2 points) Suppose that the reserve is raised for the first year end reserve. Comment on the effect that this will have on the profit vector and the NPV. 2. (9 points) A 3-year endowment insurance is issued to 60). The policy has the following details: (i) Face amount is 250,000 (ii) Mortality follows the LTAM Table (iii) Pre-contract expenses are 500 (iv) Commissions are 8% of each premium (v) The hurdle rate is 15% (vi) Policy reserves are oV = 0,1V = 75,000, 2V = 160,000 (vi) Annual premium is 80,000 (vii) Earned interest rates for the policy are 8%, 10% and 12% in the first, second and third years, respectively. (a) (4 points) Calculate the expected profit vector for the policy. (b) (3 points) Calculate the profit signature and NPV for the policy. (c) (2 points) Suppose that the reserve is raised for the first year end reserve. Comment on the effect that this will have on the profit vector and the NPV