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ss7ja [257]
3 years ago
11

Suppose you are 45 and have a $50,000 face amount, 15-year, limited-payment, participating policy (dividends will be used to bui

ld up the cash value of the policy). Your annual premium is $1,000. The cash value of the policy is expected to be $12,000 in 15 years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. Use Exhibit 1-B. (Do not round intermediate calculations. Round time value factor to 3 decimal places and final answer to the nearest whole number.)
Business
2 answers:
taurus [48]3 years ago
8 0

Answer:

The Net cost of insurance $13,129.

Explanation:

Annual premium (15 years) $15,000 ($1,000 × 15 years)

Time value of money

$1,000 × 25.129 = $25,129 (Exhibit 1-B, 15 years, 7%)

+$10,129 ($25,129 - 15,000)

Total cost of policy $25,129 ($15,000 + 10,129)

Cash value (end of 15 years) -$12,000

Net cost of insurance $13,129 ($25,129 - 12,000)

At a 7 percent annual yield, your account would have accumulated to $25,129 in 15 years. You have paid $13,129 for 15 years of insurance protection.

aalyn [17]3 years ago
6 0

Answer:

13,129

Explanation:

We will compare the end value of the policy with the future value of the premiums as moeny has a value over time of 7%

<em><u>Future Value of the premiums at year 10th if they were invested elsewhere:</u></em>

C \times \frac{1-(1+r)^{-time} }{rate} = FV\\

C 1,000.00

time 15

rate 0.07

1000 \times \frac{1-(1+0.07)^{-15} }{0.07} = FV\\

FV $25,129.0220

Salvage value of the policy if not exercise: 12,000

We "renounce" to 25,129 dollars for not investing the cash but we receive 12,000 therefore, the net value is the difference:

25,129 - 12,000 = 13,129

It cost 13,129 to get the insurance.

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2 years ago
Onslow Co. purchased a used machine for $178,000 cash on January 2. On January 3, Onslow paid $2,840 to wire electricity to the
Aleksandr-060686 [28]

Answer:

First we must determine the total cost of the machine:

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If the machine was depreciated before time, and sold only at its salvage value, Onslow Corp. should report a loss of $27,940.

7 0
3 years ago
If you noticed that one of your co-workers was stealing a very small amount of cash from the cash register each day, how would y
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Noticing a cash embezzlement done by any colleague in work area then a personal ethics tend to be involved is loyal reporting to employer with quickly and decisively response.

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Personal ethics refers to a person's moral principles and directs individuals in their decisions both inside and outside of the workplace.

Specific moral values will impact a person on how he/she will respond to a particular situations at work and how deal with it while advancing career.

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7 0
1 year ago
Stoneheart Group is expected to pay a dividend of $3.27 next year. The company's dividend growth rate is expected to be 3.4 perc
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Answer:

The stock price is $37.16

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Dividend Valuation method is used to value the stock price of a company based on the dividend paid, its growth rate and rate of return. The price is calculated by calculating present value of future dividend payment.

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7 0
3 years ago
If an industry is made up of five identical firms, the four - firm concentration ratio is
Sedaia [141]
I had to look for the options and here is the answer. The concentration ratio that is being referred to the description above is 80%. This means that the industry consists of five identical firms and the four-firm concentration is being referred to. Hope this answers your question.
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