Bram must choose between two alternatives for $1,000,000 of life insurance coverage for the next ten years. The premium quoted to him by Sun Life Insurance Co. is $51.75 per month. Atlantic Life will charge $44.25 per month for the first five years and $60.35 per month for the subsequent five years. In both cases, monthly premiums are payable at the beginning of each month. Which policy is "cheaper" if money can earn 4.8% compounded monthly? In current dollars, how much will Bram save by choosing the less costly policy?

Question

Quizplus · Accepted Answer

The Answer of Bram must choose between two alternatives for $1,000,000 of life insurance coverage for the next ten years. The premium quoted to him by Sun Life Insurance Co. is $51.75 per month. Atlantic Life will charge $44.25 per month for the first five years and $60.35 per month for the subsequent five years. In both cases, monthly premiums are payable at the beginning of each month. Which policy is "cheaper" if money can earn 4.8% compounded monthly? In current dollars, how much will Bram save by choosing the less costly policy?

Bram Must Choose Between Two Alternatives for $1,000,000 of Life