David purchased a $100,000 participating whole life policy.The annual premium is $2,280.Projected dividends for the first 20 years are $15,624.The cash value after 20 years will be $35,260.If the premiums were invested at 5 percent interest for 20 years,the premiums would grow to $79,156.If the dividends were accumulated at 5 percent interest for 20 years,they would grow to be $24,400.The amount to which $1 deposited annually will accumulate in 20 years at 5 percent interest is $34.719.Based on this information,what is the surrender cost per thousand per year of David's policy over the 20-year period?

Question

Quizplus · Accepted Answer

The surrender cost per thousand per year is the difference between the cash value and the premiums plus dividends, divided by the face amount of the policy and the number of years. In this case, the surrender cost per thousand per year is ($35,260 - $79,156 - $24,400) / $100,000 / 20 = -$5.62.

David Purchased a $100,000 Participating Whole Life Policy