TABLE 20.2 Nonforfeiture options based on $1,000 face value STRAIGHT LIFE 20-PAYMENT LIFE Years Amount of EXTENDED Amount of EXTENDED Amount of 20-YEAR ENDOWMENT EXTENDED insurance Cash paid-up TERM Cash paid-up TERM Cash paid-up TERM policy in force value insurance Years Days value insurance Years Days value insurance Years Days 5 29 86 9 91 71 220 19 190 92 229 23 140 10 96 259 18 76 186 521 28 195 319 520 30 160 15 148 371 20 165 317 781 32 176 610 790 35 300 20 265 550 21 300 475 1,000 Life 1,000 1,000 Life Option 1: Cash value $200,000+ $1,000 = 200 x $148 = $29,600 Option 2: Reduced paid-up insurance $200,000 ÷ $1,000 = 200 x $371 = $74,200 Option 3: Extended term insurance Bob could continue this $200,000 policy for 20 years and 165 days.

TABLE 20.2 Nonforfeiture options based on $1,000 face value STRAIGHT LIFE 20-PAYMENT LIFE Years Amount of EXTENDED Amount of EXTENDED Amount of 20-YEAR ENDOWMENT EXTENDED insurance Cash paid-up TERM Cash paid-up TERM Cash paid-up TERM policy in force value insurance Years Days value insurance Years Days value insurance Years Days 5 29 86 9 91 71 220 19 190 92 229 23 140 10 96 259 18 76 186 521 28 195 319 520 30 160 15 148 371 20 165 317 781 32 176 610 790 35 300 20 265 550 21 300 475 1,000 Life 1,000 1,000 Life Option 1: Cash value $200,000+ $1,000 = 200 x $148 = $29,600 Option 2: Reduced paid-up insurance $200,000 ÷ $1,000 = 200 x $371 = $74,200 Option 3: Extended term insurance Bob could continue this $200,000 policy for 20 years and 165 days.

Fundamentals of Financial Management (MindTap Course List)

15th Edition

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 17P: EQUIVALENT ANNUAL ANNUITY A firm has two mutually exclusive investment projects to evaluate. The...

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