1. Determine the present value of the insurance benefits that could provide $40,
ID: 2757376 • Letter: 1
Question
1. Determine the present value of the insurance benefits that could provide $40,000 over the next 15 years for the Sampson family. Assume that the insurance payment could be invested to earn 6 percent interest over time. Annual amount $40,000 Number of years 15 Annual interest rate 6% Present value $388,489.96 2. Considering the insurance benefits needed to provide $40,000 over the next 15 years, plus the additional $330,000 of insurance coverage, what amount of insurance coverage is needed? Total Insurace coverage: $388,489 + $330,000 = $718,489.9 3. Given the total amount of insurance coverage needed and Dave's present age (30 years old), estimate the premium that the Sampsons would pay. 1. Determine the present value of the insurance benefits that could provide $40,000 over the next 15 years for the Sampson family. Assume that the insurance payment could be invested to earn 6 percent interest over time. Annual amount $40,000 Number of years 15 Annual interest rate 6% Present value $388,489.96 2. Considering the insurance benefits needed to provide $40,000 over the next 15 years, plus the additional $330,000 of insurance coverage, what amount of insurance coverage is needed? Total Insurace coverage: $388,489 + $330,000 = $718,489.9 3. Given the total amount of insurance coverage needed and Dave's present age (30 years old), estimate the premium that the Sampsons would pay.Explanation / Answer
1 Annual Amount = $ 40,000 Number of Years = 15 Interest Rate = 6% Future Value = $ 40,000 * 15 = $ 6,00,000 Present Value = Future Value / (1+ Interest Rate)^Years Hence PV = $ 250,359.04 2 Additional Insurance Coverage = $ 3,30,000 Hence, Total Insurance Coverage = $ 250,359.04 + $ 3,30,000 = $ 580,359.04 3 The difference between the quote and the actual charge can be attributed to the way the insurance premium is calculated. But information regarding Actual chagre is not given in question, so here we are find the premium with the help of Total insurance coverge Hence we can say PV of Total insurance coverge, which would be paid over next 15 years is total premium, allocate the same over 15 years. Total Premium = Total Insurance Coverage / ( 1 + Interest Rate )^ Years Hence Total Premium = $ 388,056.51 Premium Per Annum = $ 388,056.51 / 15 = $ 25,870.434
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.