Scenario 15.5: Consider the Following Information Based on a Story by Hubert

question 73

Multiple Choice

Scenario 15.5:
Consider the following information based on a story by Hubert B. Herring that appeared in The New York Times on Catherine has a two-pack-a-day cigarette habit. Cigarettes cost about $2 per pack. Catherine is 20. On a $250,000 life insurance policy, her annual premiums are $1200; a non-smoker's would be $500. Smokers earn from 4 to 8 percent less in income than non-smokers (lower productivity and more absence, among other things) . In this case Catherine's income is expected to be $20,500 per year over her lifetime whereas $22,000 is an average non-smoker's salary. Let interest rates are expected to be 3%.
-Refer to Scenario 15.5. If Catherine stopped smoking, then what is the total amount that Catherine will save on life insurance premiums over the rest of her expected life span?

• A) $700
• B) $14,000
• C) $30,000
• D) $42,000
• E) $56,000

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Definitions:

Mortician

A professional who prepares the deceased for burial or cremation and assists in arranging funerals.

Diabetic Ketoacidosis

A complication of diabetes that occurs when the body cannot use sugar (glucose) as a fuel source because the body has no insulin or not enough insulin and fat is used instead. Byproducts of fat breakdown, called ketones, build up in the body.

Hyperglycemia

Increase of blood sugar, as in diabetes.

Fruity Odor

A smell often described as sweet and reminiscent of various fruits, sometimes indicative of medical conditions like diabetic ketoacidosis.