Nicole, age 26, 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.

Answer rating: 100% (QA)

a Traditional net cost calculation Total premiums for 20 years 20 24860 497200 Less dividends for 20 ... View the full answer