Problem 6-5 Julia Baker died, leaving to her husband Adams an insurance policy c

Q: Problem 6-5 Julia Baker died, leaving to her husband Adams an insurance policy c

Solution d: Quarterly rate of interest = 2.5% Amount to be received $4,200 for 12 quarterlty periods, thereafter $1,640 to be received for next 25 quarters. Total periods = 12+25 = 37 Present value of payment received = $4,200 * cumulative PV Factor at 2.50% for 12 periods + $1,640 * Cumulative PV Factor at 2.50% for 13th to 37th period = $4,200 * 10.25776 + $1,640 * 13.69955 = $65,550

ID: 2532825 • Letter: P

Question

Problem 6-5

Julia Baker died, leaving to her husband Adams an insurance policy contract that provides that the beneficiary (Adams) can choose any one of the following four options. Money is worth 2.50% per quarter, compounded quarterly. Compute Present value if:

(d) $4,200 every 3 months for 3 years and $1,640 each quarter for the following 25 quarters, all payments payable at the end of each quarter. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Present value $

Explanation / Answer

Solution d:

Quarterly rate of interest = 2.5%

Amount to be received $4,200 for 12 quarterlty periods, thereafter $1,640 to be received for next 25 quarters.

Total periods = 12+25 = 37

Present value of payment received = $4,200 * cumulative PV Factor at 2.50% for 12 periods + $1,640 * Cumulative PV Factor at 2.50% for 13th to 37th period

= $4,200 * 10.25776 + $1,640 * 13.69955

= $65,550

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Problem 6-5 Julia Baker died, leaving to her husband Adams an insurance policy c

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