You have a goal of wanting to provide some assurance to your family that they will be
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Question:
Assume (realistically) that there is a plan which you pay $750 per month for 20 years, and then you have your $250,000 life insurance policy "paid up" for life (you never have to pay any more premiums, but you are guaranteed a $250,000 payout whenever you die)
You would make your first payment the day you sign up, and them at the end of each month for a total of 240 payments.
You want to compare the value of that plan to buying term insurance which costs you $225 per month for a $250,000 policy with the rate guaranteed for 20 years (in other words you would pay the $225 monthly premium for 20 years, then drop the policy and your coverage would end).?
The relevant comparison is to look at investing the difference (between the $750 and the $225) and see how long it would take you to accumulate the $250,000 in an account so you could "self-insure". ?
Assume you can earn 8.0% (annual) on the invested difference (but remember you are investing and compounding monthly). How long will it take you to accumulate $250,000?
How much will you have accumulated at the end of 20 years? Solve the problem using the "Brute Force Method for finding Future Values" in a spreadsheet?
Related Book For
Contemporary business 2012 update
ISBN: 978-1118010303
14th edition
Authors: Louis E. Boone, ? David L. Kurtz
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