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Deposits of the saving plan

Now that you have defined the variables discount_factors, deposits and payments, you are ready to determine the value \(K\) of the yearly savings deposits using the actuarial equivalence relationship between the deposits (red cash flow) and the payments (blue cash flow).

This exercise is part of the course

Life Insurance Products Valuation in R

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Exercise instructions

  • Calculate the present value of the deposit pattern as the sum() of the elementwise product of deposits and discount_factors.
  • Do the same for the payment pattern by summing over the product of payments and discount_factors.
  • Using the concept of actuarial equivalence, the yearly deposit K in the first four years can be calculated by dividing PV_payment by PV_deposit.

Hands-on interactive exercise

Have a go at this exercise by completing this sample code.

# Calculate the present value of the deposits
PV_deposit <- ___(___ * ___) 

# Calculate the present value of the payments
PV_payment <- ___(___ * ___) 

# Calculate the yearly deposit K in the first 4 years
K <- ___
K
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