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Sta 2190: Introduction To Actuarial Science Question Paper
Sta 2190: Introduction To Actuarial Science
Course:Bachelor Of Science In Actuarial Science
Institution: Dedan Kimathi University Of Technology question papers
Exam Year:2013
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DEDAN KIMATHI UNIVERSITY OF TECHNOLOGY
UNIVERSITY EXAMINATIONS 2012/2013
FIRST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE
STA 2190: INTRODUCTION TO ACTUARIAL SCIENCE
DATE: 1ST July 2013 TIME: 8.30AM – 10.30AM
INSTRUCTIONS: Answer QUESTION ONE and any other TWO QUESTIONS
Question One, Compulsory: [30 Marks]
a) Who is an actuary and what is actuarial science. (1 marks)
b) What are the roles of actuaries in the following fields
(i) Insurance (2 Marks)
(ii) Pensions and benefits (1 Mark)
(iii) Finance and investments (1 Mark)
c) Explain the following terms.
(i) Insurance (1 Mark)
(ii) Pensioner (1 Mark)
(iii) Bonds (1 Mark)
(iv) Decreasing term Assuarance (2 Marks)
d) Briefly discuss any five principles that form the basis for financial management
(5 Marks)
e) What is strategic planning in financial management? What choices does a financial manager have to make during strategic planning. (5 marks)
f) You borrow $12,000 from a bank. The loan is to be repaid in full in one year''s time with a payment due of $12,780.
(a) What is the interest amount paid on the loan? (2 marks)
(b) What is the annual interest rate? (2 marks)
g) Distinguish between pure and speculative risks. (4 Marks)
h) Using compound interest formula, what principal does Andrew need to invest at 15% compounding annually so that he ends up with $10,000 at the end of five years?
(3 Marks)
Question Two, Optional: [20 Marks]
(a) Assessing and controlling the risk of life insurance and pension undertakings is the origin of actuarial practice and the actuarial profession. List the basics required to succeed in managing the risk in this area. [8 Marks]
(b) (i.) Define the effective rate of interest over a given time period. [2 Marks]
(ii.) Define a nominal rate of interest. [2 Marks]
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(c) (i.) Given i = 0.07, calculate:
a) (2) i [2 Marks]
b) (4) d [2 Marks]
c) d [2 Marks]
(ii.) Comment on your answer to (i.), noting that d could be expressed as ) (? i
[2 Marks]
Question Three, Optional: [20 Marks]
(a) You are a recently recruted actuary for a rapidly expanding Kenyan-based insurance
company with a new branch in Kenya. The company intent to write a full range of lines
of business and you have be asked to expalin the following:
(i.) Why an insurer might demand more rigorous evidence of a prospective
policyholder’s health status for a term insurance than for a whole life insurance.
[4 Marks]
(ii.) Why it is common for insurers to design whole life contracts with regular
premiums payable only up to age 80. [4 Marks]
(b) The table below gives an extract from a life table.
x x l x d
30 10 000.00 34.78
31 9 965.22 38.10
32 9 927.12 41.76
33 9 885.35 45.81
34 9839.55 50.26
35 9789.29 55.17
36 9734.12 60.56
37 9673.56 66.49
38 9607.07 72.99
39 9534.08 80.11
Caculate the following life contigencies functions:
(i.) 40l . [2 Marks]
(ii.) 10 30 p . [3 Marks]
(iii.) 5 30 q . [3 Marks]
(iv.) The probability that a life currently aged exactly 30 dies between ages 35 and 36.
[4 Marks]
Question Four, Optional: [20 Marks]
(a) (i.) (a) Describe the benefits provided by Employer’s Liability insurance. [2 Marks]
(b) Describe briefly, with examples, the distinct groups of insured perils for such
business. [6 Marks]
(b) David can receive one of the following two payment streams:
(i.) $100 at time 0, $200 at time n , and $300 at time 2n
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(ii.) $600 at time 10.
At an annual effective interest rate of i , the present values of the two streams are equal.
Given n v = 0.75941, determine i . [12 Marks]
Question Five, Optional: [20 Marks]
a) State the criteria that are desirable for a risk to be insurable, explaining why these criteria
are desirable. [5 Marks]
b) A life insurance policy is a policy under which the insurance company promises to pay
cash benefits on death or maturity, usually with predetermined premium and benefits
amounts. State and explain THREE types of these traditional products [6 Marks]
c) The actuarial control cycle is a specific business model which describes the fundamental
nature of actuarial work. Explain the steps followed in the actuarial control cycle.
[9 Marks]
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