You are looking to purchase a 25 year life insurance policy for $150,000. The policy will...

You are looking to purchase a 25 year life insurance policy for $150,000. The policy will pay annually at the end of the year. The current market interest rate is 2.5%. What should the annual payment per year be?

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Expert Solution

Information provided:

Present value= $150,000

Time= 25 years

Interest rate= 2.50%

The annual payment is calculated by entering the below in a financial calculator:

PV= -150,000

N= 25

I/Y= 2.50

Press the CPT key and PMT to compute the annual payment.

The value obtained is 8,141.39.

Therefore, the annual payment is $8,141.39.

In case of any query, kindly comment on the solution.

jeff jeffy answered 2 years ago

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