Two lives aged x and y take out a policy that will pay out 15,000 on...
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Two lives aged x and y take out a policy that will pay out £15,000 on the death of (x) provided that (y) has died at least 5 years earlier and no more than 15 years earlier. (1) Express the present value of this benefit in terms of the random variables denoting the future lifetimes of (x) and (y). [2] (ii) Give an integral expression (in terms of single integrals only) for the expected present value of the benefit. [3] (iii) Prove that the expected present value is equal to: 15,000 PX S 15PX Sy] v³5 Px sy -pls [3] (iv) State the appropriate premium payment term for this policy, assuming premiums are to be paid annually in advance... [2] [Total 10] Two lives aged x and y take out a policy that will pay out £15,000 on the death of (x) provided that (y) has died at least 5 years earlier and no more than 15 years earlier. (1) Express the present value of this benefit in terms of the random variables denoting the future lifetimes of (x) and (y). [2] (ii) Give an integral expression (in terms of single integrals only) for the expected present value of the benefit. [3] (iii) Prove that the expected present value is equal to: 15,000 PX S 15PX Sy] v³5 Px sy -pls [3] (iv) State the appropriate premium payment term for this policy, assuming premiums are to be paid annually in advance... [2] [Total 10]
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i The present value of the benefit can be expressed in terms of the random variables denoting the fu... View the full answer
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
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