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FRM Part I · FRM Exam Part I · Insurance Companies and Pension Plans

A mortality table shows the following for a cohort: 100,000 people alive at age 60, 98,000 alive at age 61, and 95,900 alive at age 62. What is the probability that a person alive at age 61 dies before reaching age 62 (that is, q61)?

The conditional probability of dying between 61 and 62 is the deaths in that year divided by the number alive at 61: 2,100 divided by 98,000, or about 2.14%. Dividing by the original 100,000 would give 2.10%, the wrong base.

  1. A2.14%Correct
  2. B4.10%
  3. C2.10%
  4. D2.00%

Explanation

q61 = (l61 - l62)/l61 = (98,000 - 95,900)/98,000 = 2,100/98,000 = 2.143%. Using the original cohort of 100,000 as base gives 2.10%, which is the wrong base because the question is conditional on survival to 61.

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