Present value. Standard Insurance is developing a long-life insurance policy for people who outlive their retirement...

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Present value. Standard Insurance is developing a long-life insurance policy for people who outlive their retirement nest egg. The policy will pay out $260,000 on your 82nd birthday. You must buy the policy on your 65th birthday The insurance company can earn 5.5% 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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Answer 1

Answer #1

Number of Years = 17 years
Rate = 5.5%

The minimum purchase price of the policy = 260,000/(1+5.5%)¹⁷ = 104,636.10

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Answer 2

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