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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Calculate the value of the nonforfeiture options for the following life insurance policies.

Face Value Years in Cash Reduced Paid-U p Extended Term
of polics Force Type of Polio Value Insurance Years Days
13. 25.000 5 20-Year Endowment

To determine

To calculate: The value of the nonforfeiture options that is cash value, reduced paid-up insurance and extended term in years and days for the provided life insurance, face value of policy is $25000, years in force 5 and type of policy is 20years endowment.

Explanation

Given Information:

The provided life insurance is,

The face value of policy is $250,00, years in force 5 and type of policy is 20years endowment.

Formula Used:

The steps to calculate the various non-forfeiture options are as follows:

Step1: First calculate the number of $1000 of insurance by division of the face value of the policy by $1000 and rounding to the nearest whole $1000.

Numberof $1000=Facevalue of the policy$1000

Step2: Now there are three options:

Option I-Cash value: For this, fix the appropriate dollars per $1000 in the Cash value column of the table 19-3 and multiply it by the number of $1000 of insurance.

Option II-Reduced Paid-Up Insurance: Determine the appropriate dollars per $1000 in the Reduced Paid -Up Insurance column of the table 19-3 and multiply it by the number of $1000 of insurance.

Option III-Extended Term: For this fix the length of time of new extended term policy in Years and Days column of table 19-3.

Calculation:

The face value of policy is $25000, years in force 5 and type of policy is 20years endowment.

The provided face value of policy is $25000.

Step 1: Find the number of $1000 are,

number of $1000=facevalue of policy$1000=250001000=25

Step2: Option 1: find the Cash-value to find that after being in force 5years a 20years endowment of the policy from the table 19-3 has a cash value of $ 91 per $1000 of the insurance and again multiply the number by $1000 of insurance

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