A 25-year mortgage of 100,000 issued to (40) is to be repaid with equal annual payments at the end of each year. A 25-year term insurance has a death benefit which will pay off the mortgage at the end of the year of death including the payment then due.
You are given: i) i = 0.05
ii) 25-year temporary life annuity due on (40) has present value of 14
iii) 25q40 = 0.2 {the prob. that (40) dies in 25 years}
Calculate the net annual premium for this term insurance.
(a) 405 (b) 414 (c) 435 (d) 528 (e) 694
The answer is 435.