## Monday, April 30, 2007

### Yield of 3.41%

Dear Mr Tan

Please calculate the yield for me on this policy:

* Surrender value now: S\$11239.
* Surrender value in 2018: \$23,165.
* Sum assured \$25,000 (whole life policy)

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My calculation shows a yield of 3.41% p.a. for the next 11 years. As this is a whole life policy, the yield is probably satisfactory. I suggest that you can keep this policy.

Anonymous said...

My calculation shows a yield of 3.36% p.a. for the next 11 years, not 2.66%.

Assumptions:

2007: (11239+519)*(X^11)
2008: 519*(X^10)
2009: 519*(X^9)
2010: 519*(X^8)
2011: 519*(X^7)
2012: 519*(X^6)
2013: 519*(X^5)
2014: 519*(X^4)
2015: 519*(X^3)
2016: 519*(X^2)
2017: 519*(X^1)
2018: -23165

Solving above, X=1.0336 or 3.36%.
Even if you add an additional 519 payment in 2018, yield still comes out to 3.11%.

Tan Kin Lian said...

Thank you for checking my figures. I entered one number wrongly into the calculator and got the wrong result.

The revised yield is 3.41%, which is quite close to you 3.36%. The difference is due to the assumption of timing of the payment.