Question
MQ insurance company issues life annuities. It prices these annuities using the following probabilities. Survival probability Year 1 0.83 2 0.64 3 0.4 4 0
MQ insurance company issues life annuities. It prices these annuities using the following probabilities.
| Year | |||
|---|---|---|---|
| 1 | 0.83 | ||
| 2 | 0.64 | ||
| 3 | 0.4 | ||
| 4 | 0 |
The annuities pay $50,000 at the end of each year while the policyholder is alive. MQ insurance believes it can earn 9% p.a. interest on investments. MQ insurance has an initial cost of $50 at the date of issue.
(c) Calculate the fair single premium value which is paid on the issue date of this policy. Round your answer to two decimal places.
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Financial Accounting A Focus On Interpretation And Analysis
Authors: Richard F Kochanek, A Douglas Hillman
7th Edition
1111061750, 9781111061753
