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.
* Annual premium: S$519.
* Surrender value in 2018: $23,165.
* Sum assured $25,000 (whole life policy)

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REPLY:

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.
at

2 comments:

  1. AnonymousApril 30, 2007 4:01 PM

    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%.

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  2. Tan Kin LianApril 30, 2007 6:34 PM

    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.

    ReplyDelete