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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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An actuary at an insurance company is validating a newly implemented model that calculates the expected future payoff of term life policies. The actuary spot checks the calculations by using an example of a 70-year-old policyholder with a term life insurance policy. The policy pays out USD 350,000 if the policyholder dies between the ages of 72 and 73, and pays nothing otherwise. The actuary uses the following information to calculate the expected future payoff of this policy:

Age (years)Probability of death within 1 yearCumulative survival probability
700.0154130.82573
710.0170890.81301
720.0188610.79911
730.0207050.78404

Assuming any payout occurs at the end of the year, what is the closest value to the expected payout on this policy?

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