policy with his wife as the beneficiary. The quoted annual premium for Liam is $
ID: 2815633 • Letter: P
Question
policy with his wife as the beneficiary. The quoted annual premium for Liam is $8.68 per Liam OKelly is 29 years old and is thinking about buying a term ife insuranoe thousand dollas of insurance coverage. Because Liam wants a $80,000 policy (which is 2.5 times his annual salary), the annual premium would be $694, with the first i dammsugests t attes 94 anual pre um should mediately (ie riend of edinago dmu tualfund rather thant ens rance policy. "Ifthe mutual fu deans 9% per ede o year, you gan become a millionaire by the time you retire at age 65," the friend advises. the iconto view he interest and annuity table for discrete compounding when i. 9% per year. The future value of annual premiums deposited in a good mutual fund is(Rdund to the nearest dolilar.)Explanation / Answer
Future value of annuity due = Annuity * [ (1+r)n – 1 ] / r * (1 +r)
Here n = 65 - 21 = 44 years till maturity
= 694 * [ (1.09)44 – 1 ] / 0.09 * (1.09)
= 364,251.96
The future value of annual premiums deposited in a good mutual fund is $ 364,251.96
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