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X5.1 A 10-year endowment assurance policy has a sum assured of 12,000 payable on survival or at the end of the year of earlier death.

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X5.1 A 10-year endowment assurance policy has a sum assured of 12,000 payable on survival or at the end of the year of earlier death. If the policy is surrendered, the policyholder will receive a return of premiums without interest. Surrenders can occur only at the end of a policy year. A level premium of 1,100 pa is payable annually in advance. For a policy in force at the start of the fifth year you are given the following details: () Renewal expenses 40 Claim expenses on death or surrender 100 Reserve at the start of year 5,000 Reserve at end of year (per policy still in force) 6,500 Rate of interest 8% pa effective Dependent probability of death 0.01 Dependent probability of surrender 0.07 Calculate the profit expected to emerge at the end of the fifth year, per policy in force at the start of that year. [3]

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