Suppose you are 30 and have a $115,000 face amount, 20-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $1,035. The cash value of the policy is expected to $4,600 in 20 years. Using time value of money and assuming you could invest you money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D) Note: Use appropriate factor(s) from the tables provided. Do not round intermed calculations. Round time value factor to 3 decimal places and final answer to the
Suppose you are 30 and have a $115,000 face amount, 20-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $1,035. The cash value of the policy is expected to $4,600 in 20 years. Using time value of money and assuming you could invest you money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D) Note: Use appropriate factor(s) from the tables provided. Do not round intermed calculations. Round time value factor to 3 decimal places and final answer to the
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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![Problem 12-16 Determining the Cost of Insurance [LO12-5]
Suppose you are 30 and have a $115,000 face amount, 20-year, limited-payment,
participating policy (dividends will be used to build up the cash value of the
policy). Your annual premium is $1,035. The cash value of the policy is expected to be
$4,600 in 20 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. Use
(Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D)
Note: Use appropriate factor(s) from the tables provided. Do not round intermediate
calculations. Round time value factor to 3 decimal places and final answer to the
nearest whole number.
Net cost of insurance](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb41eccf1-19f0-4d26-8255-a1fac0fa795a%2F4bb2d5fb-4d8a-4a33-be1d-63b963a23596%2F2l04qi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 12-16 Determining the Cost of Insurance [LO12-5]
Suppose you are 30 and have a $115,000 face amount, 20-year, limited-payment,
participating policy (dividends will be used to build up the cash value of the
policy). Your annual premium is $1,035. The cash value of the policy is expected to be
$4,600 in 20 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. Use
(Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D)
Note: Use appropriate factor(s) from the tables provided. Do not round intermediate
calculations. Round time value factor to 3 decimal places and final answer to the
nearest whole number.
Net cost of insurance
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