Question

1.Just before his first attempt at bungee jumping, John decides to buy a life insurance policy. His annual income at age 30 is $35,000, so he figures he should get enough insurance to provide his wife and new baby with that amount each year for the next 35 years. If the long-term interest rate is 6.5%, what is the present value of John's future annual earnings?

a. (Round your answer to the nearest cent.) $ ____________

b. Rounding up to the next $50,000, how much life insurance should he buy? (Round your original answer to the nearest $50,000.) $ ___________

2.Find the unpaid balance on the debt. (Round your answer to the nearest cent.)

After 5 years of monthly payments on $180,000 at 3% for 25 years. ____________

Answer 1

1a)

We have:
Periods=35

rate =6.5%

payment =$35,000

Using calculator inputs:

N	35
I/Y (rate)	6.5000%
FV	-
PMT	$         35,000.00
CPT PV	$       479,043.49

Hence present value =$479,043.49

b)

Rounding up to next $50,000

=$500,000