Question
) XYZ Insurance is conducting a profit test for a fully discrete 3-year term insurance policy with a death benefit of 300,000 issued to a
) XYZ Insurance is conducting a profit test for a fully discrete 3-year term insurance policy with a death benefit of 300,000 issued to a life aged 50. For the profit test you are given the following additional information: The gross premium is 500. The expenses are 20% of gross premium plus 75 in the first year and 5% of gross premium plus 25 thereafter. The interest earned on insurers funds is 6% per year. Mortality follows the Standard Ultimate Life Table. Policy lapses will be 20% of policies in all the years. The reserves are 125.36 and 278.42 in years 1 and 2 respectively. No cash surrender values upon surrender the policy. The risk discount interest is 7% per year. Determine the profit margin for this contract.
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