In: Finance
You have the opportunity to purchase a $150,000 Term life insurance policy for $145 per year for the next four years. Your bank has offered you credit life insurance in conjunction with a $12,000 four-year (48-month) loan you are applying for. The credit life insurance premium would be a one-time-up-front fee of $325. What is the annual cost per $1,000 of insurance for the term life insurance and the credit life insurance? $0.97 per thousand for Term Life Insurance and $6.77 per thousand for Credit Life Insurance. $6.77 per thousand for Term Life Insurance and $0.97 per thousand for Credit Life Insurance. $0.08 per thousand for Term Life Insurance and $0.18 per thousand for Credit Life Insurance. $0.18 per thousand for Term Life Insurance and $0.08 per thousand for Credit Life Insurance.
Answer:
Correct answer is:
$0.97 per thousand for Term Life Insurance and $6.77 per thousand for Credit Life Insurance.
Explanation:
Term life policy:
Annual premium for $150,000 term life policy for $145 per year
Premium per thousand for Term Life Insurance = 145 / 150000 * 1000 = $0.97
Credit Life Insurance:
Sum assured = $12,000
Premium for 4 years = 325
Premium per thousand for credit life insurance = 325 /4 / 12000 * 1000 =$6.77
As such option A is correct and other options B, C, D and E are incorrect.