SOLUTION: 3.A person wants to buy a life insurance policy which would yield a large enough sum of money to provide for 20 annual payments of $50,000 to surviving members of the family. The p
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Question 1173153: 3.A person wants to buy a life insurance policy which would yield a large enough sum of money to provide for 20 annual payments of $50,000 to surviving members of the family. The payments would begin 1 year from the time of death. It is assumed that interest could be earned on the sum received from the policy at a rate of 8 percent per year compounded annually.
(a) What amount of insurance should be taken out so as to ensure the desired annuity?
(b) How much interest will be earned on the policy benefits over the 20-year period?
