How would you interpret the following:
"The annual annuity benefit that can be purchased at the end of each policy year on a current basis is 105% of the annual annuity benefit that can be purchased on a valuation basis".
I took this to mean if the valuation basis annuity benefit is $100, then the current basis annuity benefit would be $105.
The model solution seems to have flipped this and says that the current basis annuity benefit would be $100 * (1/1.05).
What am I missing?
"The annual annuity benefit that can be purchased at the end of each policy year on a current basis is 105% of the annual annuity benefit that can be purchased on a valuation basis".
I took this to mean if the valuation basis annuity benefit is $100, then the current basis annuity benefit would be $105.
The model solution seems to have flipped this and says that the current basis annuity benefit would be $100 * (1/1.05).
What am I missing?
CSP U - 2011 Spring #13
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