Chris, a 40 -year-old architect, purchases a whole life insurance policy with a $500,000 death benefit. The policy includes a cash value component that grows at a fixed interest rate of 4.75% annually. Chris contributes $15,000 annually to the policy's cash value portion, and the accumulated cash value will continue to grow at the same 4.75% interest rate. What will the cash value portion be after 20 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
758 dollars comma 930 point 2 9
B
300 dollars comma 000 point 0 0
C
483 dollars comma 084 point 5 2
D
798 dollars comma 873 point 9 9
Explanation
Use the given formula with annual contributions of $15,000, an annual interest rate of 0.0475, and 20 years: A = 15,000 × ((1 + 0.0475)^20 − 1) ÷ 0.0475. This gives approximately $483,084.52, so the cash value is choice D. The $500,000 death benefit is separate from the cash value calculation.
AI-written and checked against the verified answer.