Question

Wilma Worker has a $90,000 insurance policy for which she pays $1,200 a year. To compare the cash value of the policy to investing the same amount of money at 6%, she performs the following calculations:

a. Wilma multiplies $1,200 x 1.26 $ 1,512
b. Wilma multiplies $1,200 x 1.19 $ 1,428
c. Wilma multiplies $1,200 x 1.12 $ 1,344
d. Wilma multiplies $1,200 x 1.06 $ 1,272
e. Wilma sums the a-d and adds $1,200 $ 6756
f. Wilma calculates the cash value of a $90,000 policy after 5 years $ ________

Answer 1

@ShadowLegendX

Answer 2

i need help with f

Answer 3

@AloneS

Answer 4

is it 2700

Answer 5

If we have a time horizon of 5 years, that's not quite fine.

"After 5 years" means the END of year 5. If you have a premium in there with NO interest, you are in the wrong place.

s/b 1200 * (1.06 + 1.06^2 + 1.06^3 + 106^4 + 1.06^5) = 7170.38

The cash value of the policy must be given in the contract.