Question

Nicole, age 25, is considering the purchase of a $20,000 participating ordinary life insurance policy. The annual premium is $248.60. Projected dividends over the first 20 years are $814. The cash value at the end of 20 years is $4314. If the premiums are invested at 5 percent interest, they will accumulate to $8631 at the end of 20 years. If the dividends are invested at 5 percent interest, they will accumulate to $1163 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 $1000 per year.
b. Based on the surrender cost index, calculate the cost per $1000 per year.
c. Based on the net payment cost index, calculate the cost per $1000 per year.



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  • CreatedJanuary 30, 2015
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