An annuity-due issued to a 40-year-old that pays 1 each year until death or age 60, whichever comes first, has an actuarial present value given by which expression?

Study for the MAS-1 exam of the Casualty Actuarial Society. Utilize flashcards and multiple choice questions with detailed hints and explanations for each query. Prepare thoroughly for your exam!

Multiple Choice

An annuity-due issued to a 40-year-old that pays 1 each year until death or age 60, whichever comes first, has an actuarial present value given by which expression?

When payments stop at age 60, the value equals the present value of a lifetime annuity-due for a 40-year-old minus the value of the payments that would occur after age 60 if the life survives to 60.

The full life annuity-due for a life aged 40 has present value a_double_dot_40. The tail beyond 60 is the payments that would occur starting at age 60 onward, but only if the life reaches 60. The present value of that tail is the probability of reaching 60 from age 40, multiplied by the value at time 60 of a life annuity-due, discounted back to time 0. In actuarial notation this tail contribution is E40 a_double_dot_60, scaled by the 20 years from 40 to 60, giving 20 E40 a_double_dot_60.

Therefore the actuarial present value is a_double_dot_40 minus 20 E40 a_double_dot_60.

An annuity-due issued to a 40-year-old that pays 1 each year until death or age 60, whichever comes first, has an actuarial present value given by which expression?

Study for the MAS-1 exam of the Casualty Actuarial Society. Utilize flashcards and multiple choice questions with detailed hints and explanations for each query. Prepare thoroughly for your exam!

An annuity-due issued to a 40-year-old that pays 1 each year until death or age 60, whichever comes first, has an actuarial present value given by which expression?

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