CS/JAN 2013/ASC475

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UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE

ACTUARIAL MATHEMATICS II

COURSE CODE

ASC475

EXAMINATION

JANUARY 2013

TIME

3 HOURS

INSTRUCTIONS TO CANDIDATES
1.

This question paper consists of five (5) questions.

2.

Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3.

Do not bring any material into the examination room unless permission is given by the
invigilator.

4.

Please check to make sure that this examination pack consists of:
i)
ii)

the Question Paper

an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 4 printed
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CS/JAN 2013/ASC475

QUESTION 1
A couple of two independent lives, Adam (50) and Hawa (30), has purchased a joint-life
insurance with RM1 benefit subject to a constant force of mortality, fj. 0.05. Given 8 = 0.03,
calculate:
a

930-50

(5 marks)
"'

30:50

(5 marks)
c)

Var[T30:50]
(5 marks)

d)

^30:50

(5 marks)

QUESTION 2
A double decrement model has forces of decrement given by:
H{Jlt =
t"x + t

100-(x+t)

for j = 1, 2 and t < 100 - x.

'

Find:
a) tP?}

b) g(t)

c) f(t,2)

(2 marks)

(5 marks)

(5 marks)

d) E[T(x)]
(8 marks)

QUESTION 3
a) A 30-year term insurance was purchased on Computer A (30) and Computer B (40). This
insurance provides the following benefits:
i) RM140,000 if Computer A breaks down before Computer B.
ii) RM180,000 if Computer B breaks down before Computer A.

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CS/JAN 2013/ASC475

Given:

Mortality for both computers follows /x = 100 - x , 0 < x < 100.

Both computers have independent future lifetimes.
Benefit is payable at the moment of the first death.
/ = 0.

i)

Calculate the probability that at least one computer will break down
within 10 years.
(4 marks)

ii) Calculate the probability that Computer A will break down second
within 10 years.
(4 marks)
iii) Calculate the probability that the second break down occurs between
10th and 20th year.
(6 marks)
b) Z is the present value random variable for an insurance on the lives of Jack and Jill. This
insurance provides the following benefit:
i) RM500 at the moment of Jack's death if Jill is alive at that time; and
ii) RM1,000 at the moment of Jill's death if Jack is dead at that time.
Given:

Jack's survival function follows /x = 100 (85 - x), 0 s x < 85.

Jill's survival function follows /x = 100 (84 - x), 0 < x < 84.
Jack and Jill are both age 80.
Jack and Jill have independent future lifetimes.
/ = 0.

Calculate E[Z].
(6 marks)

QUESTION 4
Students enrollment for a Degree in Actuarial Science is based on the following multiple
decrements model:
1000 students enroll the course at t = 0.
Students leave the course due to:
> Decrement 1 (Failure);
^ =Y
0 < t < 4.
2)
> Decrement 2 (All other causes); ^
= 0.04
0 < t < 4.
48 students are expected to leave the course during their first year due to all other
causes.

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CS/JAN 2013/ASC475

Find:
a) Y.
(5 marks)
b) The number of student who remains in the course in the third year.
(7 marks)
c) The expected number of students leaving the course due to failure in the
fourth year.
(8 marks)

QUESTION 5
a) Suppose an employee ages 25 obtained his current annual salary of RM42.000 until age
of retirement at 60. The employee and his employer each contribute 2% of his annual
salary each year payable continuously throughout his service with the company. Given
that:

Sx = (1.08)x,

8 = 0.10 and /4+ t = 0.03 .

Find the actuarial present value (APV) of the contributions.

(10 marks)
b) A certain pension plan allows earliest retirement at age 65 and all retirements must occur
before 71. Ahmad is now aged 50, entered service at age 30. Derive the actuarial
present value of retirement benefits for the plan if:
i) A retirement benefit is 2% of final salary paid continuously for each year of service.
The current salary is $30,000.
(5 marks)
ii) A retirement benefit is 50% of 5-year final average salary times the number of year of
service. The current annual salary is $30,000 and retirement occurs at mid-year.
(5 marks)

END OF QUESTION PAPER

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