(b) Describe alternatives to each coverage that could reduce the cost to Mary and
John.
COURSE 5: Fall 2003 - 4 - GO ON TO NEXT PAGE
Morning Session
6. (7 points) For a defined benefit pension plan, you are given:
Pension plan formula:
1.5% of final year’s salary for each year of service up to 10 years, plus
2.0% of final year’s salary for each year of service after 10 years.
Interest Rate 6%
Salary Growth Rate 4%
Pre-retirement decrements None
Assumed retirement age 65
12
a&&65 12
Assets at 1/1/2003 300,000
Assets at 1/1/2004 320,000
Contribution made on 12/31/2003 5,000
Funding method Projected unit credit
Employee Age at Hire Age on 1/1/2003 Salary on 1/1/2003
A 30 40 30,000
B 30 60 50,000
(a) Calculate the unfunded accrued liability at 1/1/2003.
(b) The actual accrued liability on 1/1/2004 is 350,000.
Calculate the total experience gain/loss as of that date.
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COURSE 5: Fall 2003 - 5 - GO ON TO NEXT PAGE
Morning Session
7. (5 points) For a property and casualty insurance policy issued January 1, 2000, you are
given:
Effective Date Rate Change
May 1, 2000 +5%
November 1, 2000 +10%
Calendar Year
Earned Premium
Expected effective incurred losses, trended
and developed through December 31, 2002
2000 120,000 100,000
2001 130,000 110,000
2002 140,000 120,000
Expense ratio: 30%
Present average manual rate: 45
Assume all policies have a one-year term and the premium is uniformly
distributed.
Calculate the indicated average gross rate as of January 1, 2003.
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xiaona