Short- and long-term
Let's discover what happens to the present value of the guaranteed payment and the pure endowment of 10,000 EUR when you change the time horizon from 5 to 10 or 30 years. The interest rate is still constant at \(2\%\) and the survival probabilities px
have been preloaded.
This exercise is part of the course
Life Insurance Products Valuation in R
Exercise instructions
- Assign the PVs of guaranteed payments of 10,000 EUR in 5, 10 and 30 years from now to
PV
. Use vectorization. - Calculate the survival probabilities
kpx
of (20) usingcumprod()
on the subset ofpx
starting from20 + 1
untillength(px)
. - Use
kpx
at timesc(5, 10, 30)
to transform thePV
of the guaranteed payments to the EPV of the corresponding pure endowments.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# PV of guaranteed payments of 10,000 in 5, 10 and 30 years
PV <- ___ * (___) ^ - c(___)
PV
# Survival probabilities of (20)
kpx <- ___(px[(___):___])
# EPV of pure endowments of 10,000 in 5, 10 and 30 years for (20)
___ * ___[c(___)]