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Laurel and Hardy were born on the same day, and they both want to buy some life insurance products. Laurel purchases a lifetime annuity (starting
Laurel and Hardy were born on the same day, and they both want to buy some life insurance products. Laurel purchases a lifetime annuity (starting now) paying 1 every year which has an expected present value of 7 (using an effective rate of interest of 10% p.a.). Hardy purchases a whole life insurance at the same time (which will pay 1 at the end of the year of death). Assuming all assumptions are identical to those used to calculate the expected present value of Laurel's lifetime annuity, what is the expected present value of Hardy's whole life insurance? More than 1/3, but less than equal to) 2/3 There isn't sufficient information to be able to answer. Less than (or equal to) 1/3. More than 2/3
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