Explanation:
For a 30-year-old female, the conditional one-year probability of death is 0.000664. The expected first-year cost of insurance is therefore:
`$1`{,}000{,}000 \times 0.000664 = `$664`The surplus premium is the annual premium minus this expected cost:
`$6`{,}000 - `$664` = `$5`{,}336So the approximate surplus premium in the first year is $5,336.00.
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Q-702.2. Below is an extract from a mortality table (ages 30 to 34 for males and females):
| Mortality Table |
|---|
| Male |
| Probability |
| Age (Yrs) |
| ... |
| 30 |
| 31 |
| 32 |
| 33 |
| 34 |
Suppose a woman aged 30 years old buys a $1.0 million whole life insurance policy and she pays an annual premium of $6,000. What is approximately the surplus premium in the first year of the policy?
A
There is no surplus premium; i.e., zero
B
$5,336.00
C
$5,885.00
D
$5,919.00
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