For life insurance policies, some of the premium pays for the cost of the insurance, and the remainder goes toward the cash value of the policy and earns interest like a savings account. Consider the following insurance company options. Company 1: pays 4.2% compounded monthly on the cash value of their policies Company 2: pays 4.21% compounded semiannually on the cash value of their policies
For life insurance policies, some of the premium pays for the cost of the insurance, and the remainder goes toward the cash value of the policy and earns interest like a savings account. Consider the following insurance company options. Company 1: pays 4.2% compounded monthly on the cash value of their policies Company 2: pays 4.21% compounded semiannually on the cash value of their policies
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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For life insurance policies, some of the premium pays for the cost of the insurance, and the remainder goes toward the cash value of the policy and earns interest like a savings account.
Consider the following insurance company options.
Company 1: pays 4.2% compounded monthly on the cash value of their policies
Company 2: pays 4.21% compounded semiannually on the cash value of their policies
What is the APY offered by each company? (Round your answers to the nearest hundredth.)
Company 1 %
Company 2 %
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