. Based on the traditional net cost method, calculate the cost per $1,000 per year. b. Based on the surrender cost index, calculate the cost per $1,000 per year. c. Based on the net payment cost index, calculate the cost per $1,000 per year.
. Based on the traditional net cost method, calculate the cost per $1,000 per year. b. Based on the surrender cost index, calculate the cost per $1,000 per year. c. Based on the net payment cost index, calculate the cost per $1,000 per year.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Todd, age 40, is considering the purchase of a $100,000 participating ordinary life insurance policy. The annual premium is $2,280. Projected dividends over the first 20 years are $15,624. The cash value at the end of 20 years is $35,260. If the premiums are invested at 5 percent interest, they will grow to $79,159 at the end of 20 years. If the dividends are invested at 5 percent interest, they will accumulate to $24,400 at the end of 20 years. A $1 deposit at the beginning of each year at 5 percent interest will accumulate to $34.719 at the end of 20 years. a. Based on the traditional net cost method, calculate the cost per $1,000 per year. b. Based on the surrender cost index, calculate the cost per $1,000 per year. c. Based on the net payment cost index, calculate the cost per $1,000 per year.
Transcribed Image Text:Todd, age 40, is considering the purchase of a
$100,000 participating ordinary life insurance policy.
The annual premium is $2,280. Projected dividends
over the first 20 years are $15,624. The cash value at
the end of 20 years is $35,260. If the premiums are
invested at 5 percent interest, they will grow to
$79,159 at the end of 20 years. If the dividends are
invested at 5 percent interest, they will accumulate
to $24,400 at the end of 20 years. A $1 deposit at the
beginning of each year at 5 percent interest will
accumulate to $34.719 at the end of 20 years.
a. Based on the traditional net cost method,
calculate the cost per $1,000 per year.
b. Based on the surrender cost index, calculate the
cost
per $1,000 per year. c. Based on the net payment
cost index, calculate the cost per $1,000 per year.
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