Question

1. Just before his first attempt at bungee jumping, John decides to buy a life insurance policy. His annual income at age 30 is $39,000, so he figures he should get enough insurance to provide his wife and new baby with that amount each year for the next 35 years. If the long-term interest rate is 6.1%, what is the present value of John's future annual earnings? (Round your answer to the nearest cent.)
$  

Rounding up to the next $50,000, how much life insurance should he buy? (Round your original answer to the nearest $50,000.)

2. In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period.

You and your new spouse each bring home $1500 each month after taxes and other payroll deductions. By living frugally, you intend to live on just one paycheck and save the other in a mutual fund yielding 7.95% compounded monthly. How long will it take to have enough for a 20% down payment on a $155,000 condo in the city? (Round your answer to two decimal places.)
yr

Answer 1