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A Life Interest Formula

Published online by Cambridge University Press:  11 August 2014

G. E. Wallas
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Extract

Lidstone has shown that the solution to the theoretical problem of valuing a life interest is essentially indeterminate. For a uniform life interest this is generally avoided by requiring of the formula that at the end of any policy-year the purchaser will have received sufficient income to discharge all premiums to date on the supporting policy, and to provide the predetermined interest on his total outlay.

Consider a life interest to be valued of 1 per annum, and let P be the office rate of premium on the whole-life non-profit policy required to return to the purchaser his initial outlay. In the evolution of a formula three unknown quantities are involved:

G, the gross purchase price (including expenses);

T, the total initial outlay;

S, the sum assured.

Type
Research Article
Information
Journal of the Staple Inn Actuarial Society , Volume 13 , Issue 3 , July 1955 , pp. 185 - 189
Copyright
Copyright © Institute of Actuaries Students' Society 1955

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References

REFERENCES

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