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 12,000fromabank.Theloanistoberepaidinfullinoneyear″stimewithapaymentdueof12,780.
(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 10,000attheendoffiveyears?(3Marks)QuestionTwo,Optional:[20Marks](a)Assessingandcontrollingtheriskoflifeinsuranceandpensionundertakingsistheoriginofactuarialpracticeandtheactuarialprofession.Listthebasicsrequiredtosucceedinmanagingtheriskinthisarea.[8Marks](b)(i.)Definetheeffectiverateofinterestoveragiventimeperiod.[2Marks](ii.)Defineanominalrateofinterest.[2Marks]Page2of3(c)(i.)Giveni=0.07,calculate:a)(2)i[2Marks]b)(4)d[2Marks]c)d[2Marks](ii.)Commentonyouranswerto(i.),notingthatdcouldbeexpressedas)(?i[2Marks]QuestionThree,Optional:[20Marks](a)YouarearecentlyrecrutedactuaryforarapidlyexpandingKenyan−basedinsurancecompanywithanewbranchinKenya.Thecompanyintenttowriteafullrangeoflinesofbusinessandyouhavebeaskedtoexpalinthefollowing:(i.)Whyaninsurermightdemandmorerigorousevidenceofaprospectivepolicyholder′shealthstatusforaterminsurancethanforawholelifeinsurance.[4Marks](ii.)Whyitiscommonforinsurerstodesignwholelifecontractswithregularpremiumspayableonlyuptoage80.[4Marks](b)Thetablebelowgivesanextractfromalifetable.xxlxd3010000.0034.78319965.2238.10329927.1241.76339885.3545.81349839.5550.26359789.2955.17369734.1260.56379673.5666.49389607.0772.99399534.0880.11Caculatethefollowinglifecontigenciesfunctions:(i.)40l.[2Marks](ii.)1030p.[3Marks](iii.)530q.[3Marks](iv.)Theprobabilitythatalifecurrentlyagedexactly30diesbetweenages35and36.[4Marks]QuestionFour,Optional:[20Marks](a)(i.)(a)DescribethebenefitsprovidedbyEmployer′sLiabilityinsurance.[2Marks](b)Describebriefly,withexamples,thedistinctgroupsofinsuredperilsforsuchbusiness.[6Marks](b)Davidcanreceiveoneofthefollowingtwopaymentstreams:(i.)100 at time 0, 200attimen,and300 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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