Answer:
The Net cost of insurance $13,129.
Explanation:
Annual premium (15 years) $15,000 ($1,000 × 15 years)
Time value of money
$1,000 × 25.129 = $25,129 (Exhibit 1-B, 15 years, 7%)
+$10,129 ($25,129 - 15,000)
Total cost of policy $25,129 ($15,000 + 10,129)
Cash value (end of 15 years) -$12,000
Net cost of insurance $13,129 ($25,129 - 12,000)
At a 7 percent annual yield, your account would have accumulated to $25,129 in 15 years. You have paid $13,129 for 15 years of insurance protection.
