An Office Is About To Issue A Deferred Annuity Contract To A Life Aged 45 Under

An office is about to issue a deferred annuity contract to a life aged 45. Under the contract, an annuity of $2,000 per annum will be payable monthly in advance from age 60. Should the life die before the end of the deferred period, $10,000 is payable immediately on death. Premiums are payable quarterly throughout the deferred period.

Calculate the annual gross premium on the following pricing basis:

·          AM92 Select mortality table;

·          Interest of 4% per annum effective during the deferred period and 6% per annum effective from age 60 onwards;

·          Initial expense of $200;

·          Renewal expenses of $50 on receipt of each premium except the first.

Prof. Angela


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