Your insurance agent tells you the current price of the following policy is $94,
ID: 2713539 • Letter: Y
Question
Your insurance agent tells you the current price of the following policy is $94,372.
Time until annuity benefit begin
15 years
Amount of monthly annuity benefit( to be received at the end of the first month after the benefit period begins)
Annual rate of return promised over entire period
12.0 %
If you purchase this policy, how many years will your benefits last once they start?
Time until annuity benefit begin
15 years
Amount of monthly annuity benefit( to be received at the end of the first month after the benefit period begins)
$6,000Annual rate of return promised over entire period
12.0 %
Explanation / Answer
K = N*12
Price of policy = ( [(Monthly benefit)/(1 +rate of return/12*100)^K] )/(1 + rate of return/100)^15
k=1
K = N*12
94372 = ( [(6000)/(1 +12/12*100)^k] )/(1 + 12/100)^15
k=1
Number of years(N) = 16.52
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