Cash value life insurance policy

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Reference no: EM131900643

An insurance salesman offers you a Cash Value life insurance policy for $250,000 (payable on your death or at age 95, whichever happens first) for monthly premiums of $150. He indicates that cash value insurance is a great investment. From reading the textbook you know cash value life insurance assumes a 4% annual return. If you die at 95 is it a good investment, assuming you are offered the policy when you are 25?

a) What is the future value of the premiums when you turn 95?

b) At what annual interest rate would I earn $250,000 investing $150 a month for 70 years?

c) I purchased a cash value policy with a $250,000 death benefit on my 25th birthday. Based on a 4% annual return and $150 monthly premium, I would need to die before I reach the age of X to make it a good investment.

Reference no: EM131900643

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