Concept explainers
Life Insurance Exercises 59–64 are based on the following table, which shows the average life expectancies in several countries.21 Assume that all premiums you calculate are based on end-of-month deposits in a fund yielding 4.8% annual interest compounded monthly to be paid out when a person reaches the life expectancy. [hinT: See Example 2.]
Country | Japan | Canada | U.K. | U.S. | Mexico | China | India |
Life Expectancy: Male | 80 | 80 | 79 | 76 | 73 | 74 | 64 |
Life Expectancy: Female | 87 | 84 | 83 | 81 | 79 | 77 | 68 |
April May purchased an $800,000 life insurance policy in the United Kingdom when she began work at the age of 25 years. At age 35 she was transferred to Calcutta, where her insurance company raised the rate of her policy to reflect the lower life expectancy in India. How much larger were her monthly premiums in India? [hinT: See the formula in the “Before we go on” discussion after Example 1.]
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