Lynn calculated the future value of the first twenty premiums she will pay under her nonparticipating whole life insurance policy. Then she subtracted the cash value after 20 years.
Next, she divided this value by the future value annuity due factor for 20 years to arrive at an annual cost of insurance. Finally, she divided the annual cost by the number of thousands of dollars of life insurance purchased to arrive at the cost per thousand per year. Lynn calculated the
A) traditional net cost per thousand per year.
B) the Linton Yield.
C) the surrender cost per thousand per year.
D) the net payment cost per thousand per year.
Question 2
Which of the following statements about the surrender cost index for measuring the cost of life insurance is true?
A) It is based on the assumption that the policy will be in force indefinitely.
B) It takes into account the settlement options available in the policy.
C) It does not consider the cash value in the policy.
D) It takes the amount and timing of each dividend into consideration.
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Future Value Formula