Question

11. John has a life insurance policy that will pay his family $32,000 per year if he dies. If interest rates are at 2.5% when the insurance company has to pay, what is the amount of the lump sum that the insurance company must put into a bank account?

Answer 1

Answer:

$1280000

Step-by-step explanation:

Given that :

John has a life insurance policy that will pay his family $32,000 per year if he dies

If interest rates are at 2.5% when the insurance company has to pay

The amount of the lump sum that the insurance company must out into a bank account can be determined by the division of the amount to be paid by the interest rate.

i.e

the amount of the lump sum = $32000/2.5%

the amount of the lump sum = $32000/0.025

the amount of the lump sum = $1280000