Institute of Actuaries of India 2008 Subject CT1 – Financial Mathematics - Question Paper

INSTITUTE OF ACTUARIES OF INDIA
EXAMINATIONS
20th May 2008
Subject CT1 – Financial Mathematics

Time allowed: 3 Hours (10.00 – 13.00 Hrs)
Total Marks: 100

INSTRUCTIONS TO THE CANDIDATES

1. Do not write your name anywhere on the ans sheets. You have only to write
your Candidate Number on every ans sheet/s.
2. Mark allocations are shown in brackets.
3. Attempt all questions, beginning your ans to every ques. on a separate
sheet. However, answers to objective kind ques. could be written on the
identical sheet.
4. Fasten your ans sheet/s together in numerical order of ques.. This, you
may complete immediately after expiry of the exam time.
5. In addition to this paper you should have available graph paper, Actuarial
Tables and an electronic calculator.
Professional Conduct:
“It is brought to your notice that in accordance with provisions contained in the Professional Conduct
Standards, If any candidate is obtained copying or involved in any other form of malpractice, during or in
connection with the examination, Disciplinary action will be taken against the candidate which may
include expulsion or suspension from the membership of IAI.”
Candidates are advised that a reasonable standard of handwriting legibility is expected by the
examiners and that candidates may be penalized if undue effort is needed by the examiners to
interpret scripts.
AT THE END OF THE exam
Please return your ans sheet/s and this ques. paper to the supervisor
separately.
IAI CT1 0508
Page two of 5
Q. 1) The force of interest d(t) is:
d(t) = 0.007t + 0.0003t2 for all t
(i) At t = 10, compute the accumulated value of an investment of Rs 500 made at
time t = 0.
(3)
(ii) compute the constant annual effective rate of interest over the ten-year period. (2)
[5]
Q. 2) On one January 2005, a person holds subsequent 2 annuities in payment from a life
insurance company.
Annuity (a): Rs.5000 per annum payable monthly, the final payment being on one February
2020.
Annuity (b): Rs.6500 per annum payable quarterly on one January, one April, one July and 1
October every year, the final payment being on one January 2015
(i) compute current value of every of these annuities on one January 2005 at the rate of
interest of 8% per annum affective.
Immediately after receiving the quarterly payment due on one January, the person
requested that the 2 annuities be combined into a single annuity payable halfyearly
on one March and one September in every following year including 2005 with the
final annuity payment on one September 2024.
(ii) obtain the amount of the revised annuity, provided that it was computed on the basis of
an interest rate of 8% per annum effective.
(3)
(2)
[5]

Earning:   Approval pending.