Done 2 of 2 0124 12 ect ofIn lation on a Life Insurance Policy. Allen has purcha

Question

Done 2 of 2 0124 12 ect ofIn lation on a Life Insurance Policy. Allen has purchased a whole life policy with a death benefit of Calculating the E 150,000. Assuming that he dies in 8 years and the average inflation has been 2 percent, what is the value of the purchasing power of the proceeds? 012 3, Determining the Cost of Insurance. Suppose you are 45 and have a S 10,000 face amount 15-year limited-payment, part cipa ing policy (dividends will be used to build up the cash value of the policy). Your annual premium is $350. The cash value of the policy is expected to be $4,000 in 15 years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net cost of insurance

Explanation / Answer

present value of proceeds after 8 years when he dies = future value/(1+r)^n

Future value = 150000

r = 2%

n = 8 years

Present value = 150000/(1.02)^8 = 128023.6

purchasing power of the proceeds = 128023.6

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.