What is a new policyholders probability

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Question - The Endeavour insurance company issues life annuities. It prices its annuities using the following probabilities.

Survival probabilities Year Probability of surviving from start of year to end of year

1 0.88

2 0.74

3 0.46

4 0

The annuities pay $60 000 at the end of each year while the policyholder is alive. Endeavour insurance believes it can earn 4% p.a. interest on investments. It also has to provide for initial expenses of $50 at the date of issue.

Required - What is a new policyholder's probability of dying in Year 3?

a. 0.3516

b. 0.6512

c. 0.3488

d. 0.2288

Reference no: EM132994890

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