Question

If the policy premium on a 30 year $500,000 term life policy for a 35 year old female is decreased to $361, what is the percent decrease in price? (round to the nearest whole percent) A) 6% B) 7% C) 8% D) 9%

Answer 1

A) 6%

Explanation:

Answer 2

The percentage decrease in price is 21.43

Explanation:

Given as :

the policy amount fro 35 years = $500,000

The time period of policy is 35 years

The Amount decreased = $361

Let The percentage decrease = R %

Now, From compounded method

Amount after n years = initial amount ×
`(1-(Rate)/(100))^(n)`

or, $361 = $500,000 ×
`(1-(Rate)/(100))^(30)`

Or,
`(361)/(500000)` =
`(1-(Rate)/(100))^(30)`

or, 0.000722 =
`(1-(Rate)/(100))^(30)`

Or,
`0.000722^{(1)/(30)}` =
`1-(Rate)/(100)`

or, 0.7857 =
`1-(Rate)/(100)`

So,
`(Rate)/(100)` = 1- 0.7857 = 0.2143

So, Decrease rate of interest = 21.43

Hence The percentage decrease in price is 21.43 Answer