Introduction to Term Annuity modelling

Outstanding work on the Term Life model! You have done an amazing job! In the next chapter, we will build a model for a term annuity. It will be a great opportunity to practice your modelling skills and learn new techniques. See you in the next chapter!

In this chapter, you will build a simple actuarial model to calculate the actuarial present value of a term annuity. A term annuity is a contract where the insurer pays regular benefits for a fixed period - as long as the insured person is alive.

In this model, we assume:

• no expenses, commissions, or reinsurance (we calculate net value),
• a constant interest rate,
• a constant monthly probability of death (for simplicity),
• monthly benefit payments.

Create a new model

Your first step is to create a new model. To do this:

1. Open the Python shell.
2. Use the command below to create a model called exercise_2:

from cashflower import create_model
create_model("exercise_2")