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UNIVERSIDAD CARLOS III
ACTUARIAL SCIENCE & FINANCE
PROGRAM
ADVANCED LIFE CONTINGENCIES
TUTORIAL LESSON 2
1. A flat was let to a tenant aged 50(x = 50) subject to a rent
of £400 per month. The lease can be extended to the tenants’
son now aged 30(y = 30) and the rent can only be indexed by
inflation. The current market price of the flat is $150, 000 and
it is expected that the mentioned price will only increase by
inflation. The so-called real rate of interest (net of inflation) is
set at 2%. A solicitor is interested in buying this property for a
fair price. Calculate the price.
2. A mother of two(40), aged 5 and 6, wished to buy two insurance
policies that guarantee £6, 000 when they reach 23. The premi-
ums are to be paid until the mentioned age is attained or death.
Calculate the premium.
3. The Adams(40(F ) and 50(M )) wanted to hire a funeral first-
class service. The package included a superb gothic tombstone
at first death, with approximate value: $4, 000. Thence after
the second death an impressive mausoleum will be erected, worth
$10, 000. Calculate the monthly premium to be paid until both
had passed away. Assume human mortality patterns.
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4. Surprisingly the Adams’ kids insisted in paying annual premi-
ums in order to buy the former funeral service for their beloved
parents. They claimed the deal was an excellent next 10 birth-
days presents. The sibling are now aged(16(F ) and (18)M). The
premiums stop if any child faces death, whatever that means for
them. Calculate the annual premiums.
5. Calculate the net level monthly premiums to be paid by the
husband, while active in work, and the reserves chart over the
future years at issue date for a insurance policy bought by a
couple x = 40 and y = 38 including the following alternative
benefits:
(a) A $5, 000 active worker(before reaching 65) widow’s com-
pensation. Should death happen after retirement age the
sum assured is halved . Or
(b) A £2, 000 monthly widow’s annuity regardless the husband
working status upon death.
6. The famous billionaire Scrooge McDuck, recently deceased, grate-
fully granted Huey, Dewey and Louie(all aged 22) the tenancy of
his mansion at Colmenarejo Heights. Namely, the lucky duck-
lings will enjoy the luxurious facilities until the last of them
dies. An estimation of the monthly rent in such a posh loca-
tion is $3, 000. Assess the fair value of the legacy. Very serious
actuarial studies confirm that the mortality patterns of famous
ducks equal the human’s.
7. A provident father aged 40 wished to buy an insurance policy in
order to guarantee that his daughter(16) and his son(17) will be
assigned a monthly payment(each) of $1, 000 since her/his 22
birthday until they attain 24 so that both can study actuarial
science in Colmenarejo. The premiums are paid monthly until
the father or any of the siblings dies. Calculate the premium
and the reserves one year after issue.
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8. A couple aged x = 50 and y = 40 is seeking for some insurance
coverage. They decided to be paying the contract, whatever it
is, monthly until the husband attains retirement age(65) or any
unfortunate death. They were offered the following products:
(a) Widow’s compensation of £20, 000 for active worker death
and $5, 000 in case the husbad had already retired.
(b) Retirement pension $1, 000 per month until the last death
conditioned to the fact that both were alive when the hus-
band reached 65.
(c) Widow’s annuity $800 per month regarding the working
status of the deceased husband.
Calculate the monthly net level premium for each case.