FRM Part I · FRM Exam Part I · Insurance Companies and Pension Plans
A mortality table shows 90,000 persons alive at age 40 and 89,100 alive at age 41. What is the one-year probability that a person aged 40 dies before reaching age 41?
The one-year death probability is 1.00 percent. Of 90,000 people alive at age 40, 900 die before 41, and 900 divided by 90,000 equals 1 percent. The 99 percent figure is the survival probability, not the mortality rate.
- A1.00%Correct
- B0.99%
- C1.10%
- D99.00%
Explanation
Deaths = 90,000 - 89,100 = 900. Mortality rate q40 = 900/90,000 = 1.00%. Using 89,100 as the base gives 1.01% (approx. 0.99-1.01 confusion), and 99.00% is the survival probability.
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