The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

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APPENDIX TO CHAPTER XVI 411 course the present value of the chance of receiving the insur- ance, less the present value of the chance of paying the premiums. Thus, for a man aged 30, who was insured 10 years before, the chance of his death at the age of 35 will be about 4335 or .869%, since of 84,720 living at age 30, about 732 die in their 36th year. Hence the present value of the chance of receiving his insurance of $1000 in that particular year is one, or $7.07, assuming the rate of interest to be 49. In like manner we may determine the present value of the similar chance for every other year of possible life, and the sum total of these present values will be the total present value of the chance of receiving the insurance, $287.66. From this must be deducted the present value of the chance that he will pay premiums. Thus, the chance of his paying the premium in the above-named year, when he is 35 years of age, will be the chance that he will be living at that time, which is.958. This multiplied by his premium and discounted gives the present value of this possible premium payment ; this added to the like sums for every other year will give the total present value of his obligation to pay premiums, $222.86; this, in turn, sub- tracted from the present value of the prospective insurance just obtained, namely $287.66, will give the present mathe- matical value of his property, $64.80, called the value of his insurance, or the “reserve” on his policy. The true “commercial value,” or the value which he is will- ing to pay, will be somewhat higher. For, in this case, the coefficient of caution operates to increase, not to diminish, the value of the property, as insurance tends, not to make a risk, but to reduce it. The calculation of mathematical values of life insurance has been very perfectly worked out. The reader who is interested will find the most complete explanations in the Institute of Actuaries’ Text-book, 2 vols., London (Layton), 1901. es SC ER

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