Author Question: Which of the following statements describes how the net payment cost index differs from the ... (Read 64 times)

LaDunn · **on:** Jul 11, 2018

Which of the following statements describes how the net payment cost index differs from the surrender cost index?

A) Dividends are ignored.
B) The cash value is ignored.
C) Premiums are not accumulated at a specified interest rate.
D) Dividends are not accumulated at a specified interest rate.

Question 2

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 net payment cost per thousand per year of David's policy over the 20-year period?
A) 5.62
B) 13.75
C) 15.77
D) 27.38