Gracelynn, a 35 -year-old attorney, purchases a whole life insurance policy with a $300,000 death benefit. The policy includes a cash value component that grows at a fixed interest rate of 5% annually. Gracelynn contributes $10,000 annually to the policy's cash value portion, and the accumulated cash value will continue to grow at the same 5% 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
150 dollars comma 000 point 0 0
B
240 dollars comma 875 point 6 3
C
207 dollars comma 892 point 8 2
D
215 dollars comma 785 point 6 4
Explanation
Use the annuity formula with annual contributions of $10,000, an annual interest rate of 0.05, one compounding period per year, and 15 years. This gives $10,000 × [(1.05)^15 − 1] ÷ 0.05 ≈ $215,785.64. Therefore, the cash value will be about $215,785.64, choice D.
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