On July 15, 2017, XYZ Corp buys fully discrete whole life insurance policies of 1,000 on each of its 10,000 workers, all age 35 . It uses the death benefits to partially pay the premiums for the following year.

You are given:

(i) Mortality follows the Standard Ultimate Life Table

(ii) [math]\quad i=0.05[/math]

(iii) The insurance is priced using the equivalence principle

Calculate XYZ Corp's expected net cash flow from these policies during July 2018.

• -47,000
• -48,000
• -49,000
• -50,000
• -51,000

Copyright 2024. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Answer: A

[math]1,000 P=1,000 \frac{A_{35}}{\ddot{a}_{35}}=\frac{96.53}{18.9728}=5.0878[/math]

Benefits paid during July 2018 :

[math]10,000 \times 1,000 \times q_{35}=10,000 \times 0.391=3910[/math]

Premiums payable during July 2018:

[math]10,000 \times\left(1-q_{35}\right) \times 5.0878=9,996.09 \times 5.0878=50,858.10[/math]

Cash flow during July 2018:

[math]3910-50,858=-46,948[/math]

Copyright 2024. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.