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Present value. Standard Insurance is developing a​ long-life insurance policy for people who outlive their retirement...

Present value. Standard Insurance is developing a​ long-life insurance policy for people who outlive their retirement nest egg. The policy will pay out ​$240 comma 000 on your 85 th birthday. You must buy the policy on your 60 th birthday. The insurance company can earn 9​% on the purchase price of your policy. What is the minimum purchase price the insurance company should charge for this​ policy?

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Answer #1

Present value=$240,000*Present value of discounting factor(rate%,time period)

=$240,000/1.09^25

=$240,000*0.115967835

=$27,832.28(Approx).

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