Maria, age 28, wants to pay no more than $300 a year in life insurance. What is the face value of the largest 20-year term policy she can buy without spending more than $300 annually?
Annual life insurance premium (per 1,000 dollars of face value) for age 28. A 10-year term for female is 1.28, 15 year term for female is 1.54, 20 year term for female is 1.89, and whole life for female is 9.46.
a.
$234,000
b.
$158,000
c.
$11,000
d.
$567,000
To find the face value of the largest 20-year term policy Maria can buy without spending more than $300 annually, we need to divide $300 by the annual life insurance premium per $1,000 of face value for a 20-year term for a female. The premium is $1.89 per $1,000.
Dividing $300 by $1.89 gives us:
$300 / $1.89 = 158.73
So, the largest face value Maria can buy is approximately $158,000.
Therefore, the correct answer is option b. $158,000.
To find the face value of the largest 20-year term policy that Maria can buy without spending more than $300 annually, we need to calculate the maximum premium she can pay and divide it by the annual premium per $1,000 of face value for a 20-year term policy.
Step 1: Calculate the maximum premium Maria can pay:
Maximum premium = $300
Step 2: Determine the annual premium per $1,000 of face value for a 20-year term policy for a female aged 28:
20-year term for female = $1.89
Step 3: Calculate the face value:
Face value = Maximum premium / Annual premium per $1,000 of face value
Face value = $300 / $1.89
Using a calculator, we find:
Face value ≈ $158.73
Therefore, the face value of the largest 20-year term policy that Maria can buy without spending more than $300 annually is approximately $158,000.
The correct answer is b. $158,000.