Mack purchased a variable annuity with a $50,000 premium deposit, which he split equally between two subaccounts. At the time of purchase, the value of a unit in Subaccount #1 was $25, and the value of a unit in Subaccount #2 was $10. Six months later, the unit value of Subaccount #1 had risen to $30, and the unit value of Subaccount #2 had declined to $8. What was the value of Mack's contract at that point? (Search Chapter 2) a. $48,000 b. $50,000 c. $52,000 d. $55,000
Solution :-
Amount of Premium deposit in Sub Account 1 = $25000
At the time of Purchase Unit Value of Sub Account 1 = $25
Therefore Units Purchased of Subaccount 1 = $25000 / $25 = 1000 Units
Amount of Premium deposit in Sub Account 2 = $25000
At the time of Purchase Unit Value of Sub Account 2 = $10
Therefore Units Purchased of Subaccount 2 = $25000 / $10 = 2500 Units
Now after 6 months Value of Unit of Subaccount 1 = $30
Value of Unit of subaccount 2 = $8
Now the Valyue of Mark Contract at that point = (1000 * $30) + (2500 * $8) = $30000 + $20000 = $50000
Therefore the correct answer is (B) that is $50000
Mack purchased a variable annuity with a $50,000 premium deposit, which he split equally between two...
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