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Standard Insurance is developing a​ long-life insurance policy for people who outlive their retirement nest egg....

Standard Insurance is developing a​ long-life insurance policy for people who outlive their retirement nest egg. The policy will pay out ​$300,000 on your 85th birthday. You must buy the policy on your 62nd birthday. The insurance company can earn 8.5​% on the purchase price of your policy. What is the minimum purchase price the insurance company should charge for this​ policy?

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Expert Solution

Present value=$300,000*Present value of discounting factor(rate%,time period)

=$300,000/1.085^23

=$45944.90(Approx).

jeff jeffy answered 2 years ago
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