Derive and apply two-term and three-term Woolhouse approximations for calculating expected present values of state-dependent cash flows.
Free SOA Exam ALTAM (Advanced Long-Term Actuarial Mathematics) lesson in Premium and Policy Valuation for Long-Term Coverages. 13 min read, ~1,877 words.
Two-term Woolhouse:. Three-term adds. Three-term needs, the force of mortality at the starting age, plus the force of interest. Temporary annuity rule:. Multi-state extension: replace with the total force of leaving the paying state,. Use 3-term when and you need EPVs accurate to the nearest cent on premiums or reserves.
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- Example 1
- Example 2
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Learning objectives
- 2b
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