Isaac, a 35 -year-old software developer, purchases a whole life insurance policy with a $250,000 death benefit. The policy includes a cash value component that grows at a fixed interest rate of 3.6% annually. Isaac contributes $9,000 annually to the policy's cash value portion, and the accumulated cash value will continue to grow at the same 3.6% interest rate. What will the cash value portion be after 15 years? Use the formula cap A is equal to the fraction with numerator cap p times open paren open paren 1 plus r over n close paren raised to the n t power minus 1 close paren and denominator open paren r over n close paren
Answer
A
229 dollars comma 472 point 2 1
B
174 dollars comma 948 point 5 4
C
87 dollars comma 474 point 2 7
D
135 dollars comma 000 point 0 0
Explanation
Use the future value formula for annual contributions, with P = $9,000, r = 0.036, n = 1, and t = 15. Substituting gives A = 9,000 × [(1.036^15 − 1) ÷ 0.036] ≈ $174,948.54. Therefore, the cash value is about $174,948.54, choice D.
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