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

question 98

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. What is the total amount Catherine will lose in earnings by being a smoker, if she works now and continues until age 65?

• A) $1500
• B) $67,500
• C) $90,000
• D) $97,500
• E) $120,000

---

Definitions:

Working Backward

A problem-solving strategy where the solution is imagined first and steps to reach it are then determined.

Changing Representation

The process of altering how information, ideas, or concepts are perceived or depicted.

Algorithm

A well-defined procedure or set of rules to be followed in calculations or problem-solving operations.

Heuristic

A mental shortcut that allows individuals to solve problems and make judgments quickly and efficiently, based on practical methods and experiences.