Emery, a 45 -year-old entrepreneur, purchases a whole life insurance policy with a $600,000 death benefit. The policy includes a cash value component that grows at a fixed interest rate of 3.9% annually. Emery contributes $12,000 annually to the policy's cash value portion, and the accumulated cash value will continue to grow at the same 3.9% interest rate. What will the cash value portion be after 30 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
330 dollars comma 943 point 2 0
B
1 dollars comma 134 comma 407 point 0 8
C
360 dollars comma 000 point 0 0
D
661 dollars comma 886 point 3 9
Explanation
Use the future value formula with annual contributions of $12,000, an annual interest rate of 0.039, and 30 years: A = 12,000 × ((1 + 0.039)^30 − 1) / 0.039. This gives approximately $661,886.39, so the cash value will be about $661,886.39. The $600,000 death benefit does not determine the cash value calculation.
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