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Actuarial Science I Question Paper

Actuarial Science I

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2010/2011
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
BMS 311 ACTUARIAL SCIENCE I
=================================================================
DATE: TUESDAY 30TH NOVEMBER 2010
TIME: 2.00 P.M. - 4.00 P.M.

INSTRUCTIONS
Answer Question and any other Two questions.

Question 1
a)
Waweru joined the staff pension scheme on 1st January 2008, the total monthly

remittances (his and employer’s) to the scheme at the end of each of the last 12

months is Ksh 6,000. The fund manager has declared a rate of interest of 15%,

compounded monthly for the year 2008. Determine the total amount to the credit of

Waweru’s account as at 31st December 2008.

(10 marks)

b)
A bond of Ksh 150,000 redeemable in 15 years at 105 pays 4% coupon. What is the

purchase price to pay 6%. Show the accumulation of discount by schedule.

(10 marks)
c)
Using the English Life Table No.12 for Males, find the Probability of a person

aged 40;

i)
surviving to age 50

(2 marks)

i)
Dying before age 50

4 marks)

iii)
Dying between the ages of 60 and 80.

(4 marks
Page 1 of 2
Question 2
a)
Agnes wishes to borrow Ksh 10,000 for two years and to repay the loan plus interest

at the end of the two years. Bank A charges interest on loans weekly at the nominal

rate of 11% per annum. Bank B charges interest for the first six months with an

annual effective rate of 3% and for the remaining period with an annual effective rate

of 15%. In each case calculate the amount payable at the end of the two year period.

Which bank should Agnes choose for the loan?

(10 marks

b)
Enos on retirement from a provident fund retains Ksh 600,000 and in addition

purchases an annuity that pays 144 monthly payments of Ksh 12,000 each, the first

due at the end of 5 years. If interest accrues at 12%. Compute the total amount

received from the provident fund.

(10 marks)

Question 3
a)
XYZ company borrows Kshs 10,000,000 due in 15 years for the purpose of business

expansion. If the bond agreement provides that Ksh 500,000 be raised from revenues

and put in a fund each year, what rate of interest must be charged in order to pay off

the principal of the debt at maturity?

(10 marks)
b)
Interest on certain deposits is compounded weekly. The annual effective rate is 15%.

Find the nominal rate of interest per annum. Also obtain the accumulation of an

investment of Ksh 5,000 over a period of 13 weeks.

(10 marks)

Question 4

a)
Compute the present value of an n year endowment of R to a person aged x.

(10 marks)
b)
Determine the effective rate, if the nominal rate is 6%, convertible continuously.

(5 marks)
c)
Tom wins a prize which can be taken either as a lumpsum of Ksh 10,000 paid

immediately or as monthly payments of Ksh 100 paid in advance for a ten year

period. Assuming that interest stays at 4% per annum over this 10 year period.

Which form of prize should she take.

(5 marks)

Page 2 of 2

Actuarial Science I Question Paper

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