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For a fully-discrete 3-year endowment insurance issued on (x), you are given: Death benefit is 100 payable at the end of the year of death
For a fully-discrete 3-year endowment insurance issued on (x), you are given:
- Death benefit is 100 payable at the end of the year of death for the first 3 years.
- Endowment benefit is 100 payable at the start of the 4th year.
- Gross annual premiums are determined using the pricing assumptions.
- Reserves are kV=55 for k=1,2,3 and kV=0 otherwise.
Pricing assumptions:
- First year expenses are 50% of the first year gross premium.
- Renewal expenses are 1% of each gross annual premium, including the first.
- Settlement expenses are 10.
- qx+k=0.02 for all k.
- i=0.06
Profit test assumptions:
- Pre-contract expenses are 50% of the first year premium.
- There are no renewal expenses.
- There are no settlement expenses.
- qx+k=0.03 for all k.
- i=0.07
Using the profit test assumptions, calculate the net present value by using a hurdle rate r=0.08.
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