A fully discrete whole life insurance policy paying $50,000 at the end of the year of death is issued to an individual age 36. The net premium reserve at the end of 10 years is $8,000. The net premium for this policy is $900 and the net premium for an identical policy issued to an individual age 46 is P. The effective annual interest rate of interest is 6%. Determine P.

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Elian Fitzpatrick

10 April, 10:37

A fully discrete whole life insurance policy paying $50,000 at the end of the year of death is issued to an individual age 36. The net premium reserve at the end of 10 years is $8,000. The net premium for this policy is $900 and the net premium for an identical policy issued to an individual age 46 is P. The effective annual interest rate of interest is 6%. Determine P.

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Twinkie · Answer 1

Our P = 17540 $

Explanation:

Amount of Insurance Policy = 50000$

premium reserve at 10th Year = 8000$

Net Premium for the policy = 900$

Annual Interest Rate = 6%

Net Premium at the age of 46 = ?

900 * 10 years = 9000$

9000 + Interest rate @ 6% = 9540$

Net Premium + Premium reserve of 10 Years = 9540 + 8000 = 17540$

P = 17540 $

Note: As similar policy have interest rate @ 6%, which is paid every year,

At the age of 46, Net premium reserved amount also will be recovered.