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A life insurance company issues a number of 5 year term insurance policies. After performing a profit test, the product produces a profit per starting
A life insurance company issues a number of 5 year term insurance policies. After performing a profit test, the product produces a profit per starting policy (profit signature) of [-2000, 1000, 500, -400, -100, 1700). Assume cash flows earn an annual effective rate of 2.5% per annum. a) Find the revised profit signature if negative cash flows are zeroised. (5 Marks) b) What is the Net Present Value of the original profit stream at a hurdle rate of 15%? (5 Marks) c) What is the Net Present Value of the revised profit stream at a hurdle rate of 15%
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