1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
ss7ja [257]
2 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]2 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]2 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.

You might be interested in
Stock A has an expected return of 17.8 percent, and Stock B has an expected return of 9.6 percent. However, the risk of Stock A
MrRissso [65]

Answer:

13.70%

Explanation:

The expected return of a portfolio is said to be the weighted average of the returns of the individual components,

Given that:

Stock A has an expected return = 17.8%

Stock B has an expected return = 9.6%

the risk of Stock A as measured by its variance is 3 times that of Stock B.

If the two stocks are combined equally in a portfolio;

Then :

The weight of both stocks will be 50% : 50 %

So the  portfolio's expected return can be determined as follows:

Expected return for stock A  = 50% × 17.8%

Expected return = 0.50 × 17.8%

Expected return = 8.9 %

Expected return for stock B = 50 % × 9.6 %

Expected return for stock B = 0.50 × 9.6%

Expected return for stock B = 4.8%

Expected return of the portfolio = summation of the expected return for both stocks

Expected return of the portfolio = 8.9 %  + 4.8%

Expected return of the portfolio =  13.70%

3 0
3 years ago
Freya plans to invest $3,200 a year for 25 years starting at the end of this year. How much will this investment be worth at the
Dmitry [639]

Answer:

$240,885.11

Explanation:

The formula to be used is = annual payment x annuity factor

Annuity factor = {[(1+r) ^N ] - 1} / r

R = interest rate = 8.2 percent

N = number of years = 25

[(1.082^25) - 1 ] / 0.082 = 75.276598

75.276598 x $3,200 = $240,885.11

I hope my answer helps you

5 0
2 years ago
True or false: forecasts are set on the marketing budget detail spreadsheet.
Sladkaya [172]
The statement above is true. Forecasting is the utilization of notable information to decide the heading of future patterns. Organizations use estimating to decide how to apportion their financial plans or plan for expected costs for an up and coming timeframe. This is regularly in view of the anticipated interest in the products and ventures they offer.
4 0
3 years ago
Read 2 more answers
Morgan company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semi-annually. the current market rate is
Gemiola [76]
The amount of interest owed to the bondholders for each payment is $33,750. The amount interest to the bondholders for each payment should be calculated with this formula: Interest Yield Rate x Face Value of Bond x Time (9% x $750,000 x 1/2). The market interest rate of 8% has no effect on the interest payment calculation but it impacted the bond market value.
6 0
3 years ago
Stuart Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside S
Karo-lina-s [1.5K]

Answer:

a) Contribution from the special order= $52,640.  

b) Stuart should accept the order

Explanation:

The amount of contribution to profit from the special order is the difference between the revenue  and the relevant cost of variable cost of the special order.

The relevant cost of the special order is equal the sum of all variable cost only.

Note that the allocated facility overhead is irrelevant to whether to accept or reject the order. This is so because the costs would still be incurred either way.

Relevant variable costs of special order = (880 + 510) × 47 = $65,330

Sales revenue = 2,510 × 47 =  $117,970.00

Contribution from the special order =$117,970.00 -  $65,330

                                                            = $52,640.00

B) Stuart should accept the special order because it would increase its profit by $52,640.  

5 0
3 years ago
Other questions:
  • A collective bundle of shares is called?
    11·1 answer
  • Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are
    10·1 answer
  • Benjamin co. has three products a, b, and c, and its fixed costs are $67,200. the sales mix for its products are 3 units of a, 4
    14·1 answer
  • A state may not discriminate against citizens of other states, and each must give "full faith and credit" to the official acts o
    12·1 answer
  • An investment offers $6,600 per year for 10 years, with the first payment occurring one year from now. If the required return is
    13·1 answer
  • The ledger of Claudell Company includes the following unadjusted normal balances: Prepaid Rent $1,000, Services Revenue $55,600,
    15·1 answer
  • The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by
    13·1 answer
  • Assume you are going to receive a payment of $1,000 in 5 years. You'd like to know what that cash flow would be worth in 2 years
    6·1 answer
  • What is the present value of a series of payments received each year forever, starting with $1,000 paid one year from now and th
    11·1 answer
  • ENG-114-02E-2022SP-Prof Research &amp; Reporting
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!