What portion of the cost purchased protection

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Reference no: EM131297515

You are now 25 years old and have just been sold an insurance policy with $10,000 protection on your life. The cost is $170 per year. If you live to age 65, the insurance company will pay you $20,000. Assuming you live to age 65, what portion of the annual cost can be called an investment and what portion of the cost purchased protection? Your required rate of return is 10%. Assume payments are at the end of the year. (Hint: figure out the annual payments required for the future lump sum payment of $20,000. The remaining payment that you are making must be going towards purchasing protection.)

Reference no: EM131297515

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