A Life Insurer Owes $550,000 in Eight Years

question 41

Multiple Choice

A life insurer owes $550,000 in eight years. To fund this outflow,the insurer wishes to buy STRIPS that mature in eight years. The STRIPS have a $5,000 face value per STRIP and pay a 6 percent APR with semiannual compounding. How much must the insurer spend now to fully fund the outflow (to the nearest dollar) ?

• A)$110,000
• B)$342,742
• C)$355,224
• D)$362,355
• E)$370,890

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Definitions:

Immediately

Without delay; happening right at the moment or very soon after.

Bid

An acronym in medical prescribing that stands for "bis in die" which means "twice a day".

Tid

An acronym in medical prescriptions standing for "ter in die," which means three times a day.

Prn

An abbreviation for "pro re nata," a Latin phrase meaning “as the situation demands” used in healthcare to instruct that medication should be taken as needed.