Question

Assume that upon the death of her of husband, Susan can receive a $1,000,000 death benefit from his life insurance policy or she can receive a payment of $5,750 at the beginning of each month for the next 15 years until Susan’s actuarially expected death.

After looking at the above terms, Susan looks at an option where she can leave $250,000 upon her death to her two children. Assuming an annual 3.5% rate-of-return, what would an annual payment received at the beginning of each period be if the same assumed life expectancy is 15 years?

	A.	$71,370.82
	B.	$73,868.80
	C.	$83,888.96
	D.	$86,825.07

Please show financial calculator keystrokes

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS OPTION A : $71370.82

Present Value of Benefits = $1,000,000

Future Residual Value = $250,000'

Firstly, set your calculator to the "BEGINNING" mode. For this, use :

2ND->PMT->2ND->ENTER.

Afterwards,

we want to calculate pmt.

for this,

Enter

FV=-250000 I/Y = 3.5 n =15 PV = 1000000 CPT->PMT

It comes out to be 71370.82

I hope this solves your doubt.

Feel free to comment if you still have any query.

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