The monthly premium on a five-year insurance policy is $25 payable in advance. What is the economic value today of the premium payments if money is worth 14% compounded monthly?

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The economic value today of the premium payments can be calculated using the present value of an annuity formula: $PV = P \times \frac{1 - (1 + r)^{-n}}{r}$, where $P$ is the payment amount, $r$ is the monthly interest rate, and $n$ is the total number of payments. Given a 14% annual interest rate compounded monthly, the monthly interest rate is $14\% / 12 = 1.1667\%$. The total number of payments for a five-year policy with monthly payments is $5 \times 12 = 60$. Plugging these values into the formula gives the present value of the premium payments. Calculating with the given values: $PV = 25 \times \frac{1 - (1 + 0.011667)^{-60}}{0.011667}$, which approximates to $1086.96.

The Monthly Premium on a Five-Year Insurance Policy Is $25