Dara, a 50 -year-old nurse, 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 4.5% annually. Dara contributes $8,000 annually to the policy's cash value portion, and the accumulated cash value will continue to grow at the same 4.5% interest rate. What will the cash value portion be after 25 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
356 dollars comma 521 point 6 8
B
601 dollars comma 086 point 8 9
C
267 dollars comma 149 point 7 3
D
200 dollars comma 000 point 0 0
Explanation
Use the future-value formula with annual contributions of $8,000, an annual interest rate of 0.045, and 25 years: A = 8,000 × ((1.045)^25 − 1) ÷ 0.045 ≈ $356,521.68. The $250,000 death benefit does not affect this cash-value calculation. The cash value is about $356,521.68, choice C.
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