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Table 1. Year Probability of surviving from start of year to end of year 1 0.75 2 0.58 3 0.37 4 0.23 5 0 d.
Table 1.
Year | Probability of surviving from start of year to end of year |
1 | 0.75 |
2 | 0.58 |
3 | 0.37 |
4 | 0.23 |
5 | 0 |
d. [6marks] Jackson will use $50,ooo from the total sale proceed ofinstruments as a single premium to purchase an annuity today. This annuity pays X at the end of each year while Jackson is alive. The estimated probability of Jackson surviving for the next 5 years is stated in table I. The yield rate isyassumed to be J1-3.2% pa. Calculate X value. Round your answers to three decimal places. Draw a detailed contingent cash flow diagram for instrument D, from the perspective of Jackson. 2
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