[discount_rates_problem] [summary]

The sums are carried out in Excel, the basic operations being generating cashflows, namely initial single premium, investment returns and contractual payments.

Contracts  They are EITHER pure endowments (10,000 after 15 years) OR annuities (1,000 per annum for 15 years at end of year), with all payments certain.

Inflation Protection  Payments can be either fixed or fully inflation-proofed (RPI).

Pricing Approach  This can be either market-related (“MtM”) or off-market (“Off”).

Assets Portfolios  There are 6 different investment options.

Random Experiences  There are two, “2014” and “2018a”; this will be extended.

Random Scenarios  The model is run 10,000 times using random numbers which differ over time for each variable. There are also results for 2,000 random numbers (just the first 2,000 of the 10,000).

Expected Returns  Two different multiples are considered for equities and for conventional bonds; this approach is not applied to index-linked bonds.

Surpluses And Deficits  No correction payments are made during the 15 years.

Single Premium  This is determined by the initial pricing approach.

Results  Means, standard deviations, highest 5% and lowest 5% are shown.

Publication  The results are shown as interactive Flash charts.