Lamar, age 43, wants to pay no more than $1,000 a year in life insurance. If the annual life insurance premium rate (per $1000 of face value) is $12.59, what is the largest whole life policy he can buy without spending more than $1,000 annually?
a.
$12,590
b.
$341,540
c.
$541,370
d.
$79,000
Let x be the face value of the policy.
The annual premium will be (x/1000) * $12.59.
So we need to solve the inequality (x/1000) * $12.59 ≤ $1,000.
Multiplying both sides of the inequality by 1000, we get x * $12.59 ≤ $1,000,000.
Dividing both sides of the inequality by $12.59, we get x ≤ $1,000,000 / $12.59 = $79,409.67.
The largest whole life policy Lamar can buy without spending more than $1,000 annually is $79,000.
Therefore, the answer is d.
To determine the largest whole life policy Lamar can buy without spending more than $1,000 annually, you need to calculate how much $1,000 can buy in terms of face value.
The annual life insurance premium rate per $1000 of face value is given as $12.59.
To calculate the face value that $1,000 can buy, divide $1,000 by the premium rate:
$1,000 / $12.59 = 79.53
Since we are looking for the largest whole life policy, we need to round down to the nearest whole number.
Therefore, the largest whole life policy Lamar can buy without spending more than $1,000 annually is $79,000.
Hence, the correct answer is d. $79,000.