Final answer:
To compare the cash value of the insurance policy to investing the same amount of money at 6%, we need to calculate the cash value of the policy and the future value of investing $1,200 at 6% interest for the same time period.
Step-by-step explanation:
To compare the cash value of the insurance policy to investing the same amount of money at 6%, we need to calculate the cash value of the policy and the future value of investing $1,200 at 6% interest for the same time period.
To calculate the cash value of the insurance policy, we need to know the policy's surrender value at any given time. If the policy has a surrender value of $50,000 after 5 years, for example, then the cash value of the policy would be $50,000.
To calculate the future value of investing $1,200 at 6% interest, we can use the formula:
Future Value = Principal * (1 + interest rate)^time
For example, if we invest $1,200 for 5 years at 6% interest, the future value would be:
Future Value = $1,200 * (1 + 0.06)^5 = $1,200 * (1.383) = $1,659.60
Comparing the cash value of the insurance policy to the future value of investing at 6%, we can see which option would be more beneficial.