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in BUS 3024S - Contingencies by (1.1k points)


In a standard unit-linked profit testing question like this, how would calculations change if management charges were deducted at the end of each year, after death or maturity benefits are paid? 

Is it just the expected death and maturity costs in the non-unit fund that will change as one would have calculate it on the unit-fund balance excluding management charges from the corresponding year?



by (240 points)
Hey. It would not make sense it they were charged after death or maturity benefits cause then the fund balance would equal to zero as fund would have been paid out to policyholder. They included the 'before death or maturity benefits are paid' to avoid this confusion. Hope that makes sense. 
by (1.1k points)
Oh okay I see, thank you!
by (1.6k points)
Hi, what is the reasoning behind including management charges in the unit fund and expenses in the non-unit fund? 
by (240 points)
Management charges are included in the unit fund as they are expenses that the policyholders incur on their funds. They are included in the non-unit cashflows as they are an income to the insurer providing the unit-linked products 

1 Answer

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by (2.9k points)
See comments below.