Mathematics of life contingencies 2, MATH 3281 3.

00 W
Instructor: Edward Furman
Homework 5

1. Using the assumption of a uniform distribution of deaths in each year of age

and the Illustrative Life Table with interest at the effective annual rate of 6%,
calculate
a. a20 , a50 , a80
b.V ar(aT ) for x=20,50,80.

2. Using the values obtained in Exercise 1, calculate the standard deviation and
the coefficient of variation,σ/µ, of the following present-value random variables.
a. Individual annuities issued at ages 20,50,80 with life incomes of 1,000 per year
payable continuously.
b. A group of 100 annuities, each issued at age 50, with life income of 1,000 per
year payable continuously.

3. Show that V ar(aT ) can be expressed as

2
(ax − 2 ax ) − a2x ,
δ

where 2 ax ) is based on the force of interest 2δ.

4. Calculate Cov(δaT , v T ).

1
5. Assume that µ(x + t) = µ and the force of interest is δ for all t ≥ 0.
a. If Y = aT , 0 ≤ T , display the formula for the distribution function of Y.
b. If 
aT

0≤T <n
Y =
an

T ≥ n,
display the formula for the distribution function of Y.
c. If 
0

0≤T <n
Y =
a − an

T ≥ n,
T

display the formula for the distribution function of Y.

d. If 
an

0≤T <n
Y =
a

T ≥ n,
T

display the formula for the distribution function of Y.

6. Show that
V ar(v K+1)
V ar(aK = V ar(äK+1 ) = .
d2

7. Prove and interpret the given relations:

a.ax:n = 1 Ex äx+1:n
Ax:n −Ax
b. n| ax = d
− n Ex .