Sherita, age 37, wants to pay no more than $750 a year in life insurance. If the annual life insurance premium rate (per $1000 of face value) is $3.96, what is the largest 15-year term policy she can buy without spending more than $750 annually?

Question

a.
$189,000
b.
$109,890
c.
$203,252
d.
$276,750

Answer 1

The annual premium for Sherita is $750. The premium rate per $1000 of face value is $3.96.

Let the face value of the term policy be x.

The premium for the policy is given by:
Premium = (x/1000) * $3.96

Since Sherita wants to pay no more than $750 annually, we can set up an equation:

(x/1000) * $3.96 = $750

Multiply both sides of the equation by 1000 to get:
(x) * $3.96 = $750 * 1000

Divide both sides of the equation by $3.96 to isolate x:

x = ($750 * 1000) / $3.96

x = 189,393.94

Therefore, the largest 15-year term policy that Sherita can buy without spending more than $750 annually is $189,000 (approximated to the nearest thousand).

The correct answer is a. $189,000.