Would steve have been better off to invest

Assignment Help Financial Management

Reference no: EM131301671

Ethical Dilemma. Shortly after Steve graduated from college, he considered a whole life insurance policy that would provide $10,000 in life insurance protection and accumulate a cash value of twice his current annual income by age 65. Two years later, after Steve's marriage, he bought a second policy. Through his working years he paid the $280 annual premium per policy. Steve kept remembering what the agent had told him many years before about each policy having a cash value double his annual income. Steve was nearing age 65 and dug out the policies from his safety deposit box so that he could begin to put numbers together to plan his retirement.

As he opened the two policies, he was appalled to see that the cash value on the older policy was $17,000 and on the newer policy was only $15,000. The two policies together amounted to only one third his current annual earnings, far from the figure promised him by the agent.

a. Was the agent being unethical in not showing Steve the potential impact of inflation on the policies' cash value?

b. Taking just the first policy, would Steve have been better off to invest the $280 annual premium in a mutual fund that would have given an annual return of 8% per year (assume a 30-year investment period)?

Reference no: EM131301671

Questions Cloud

How much life insurance should they purchase for mary : Amount of Insurance Needed. Considering the information in the previous problem, how much life insurance should they purchase for Mary?

Identify an actual organizational security program : Identify an actual organizational security program - Conduct research about the organization and the security program.

What factors are important to ongoing team dynamics : What are important factors to consider when leading teams within the various levels of the organization?What factors are important to consider when leading teams at the executive level?What aspects are essential in identifying appropriate members for..

Which one do you think should have the lowest : Which of these three projects do you think should have the highest risk from the point of view of investors and would therefore be evaluated using the highest discount rate? Which one do you think should have the lowest?

Would steve have been better off to invest : Was the agent being unethical in not showing Steve the potential impact of inflation on the policies' cash value?

Choose two separate cultures or subcultures to compare : Choose two separate cultures or subcultures to compare and contrast. Examples could be India and the United States or Gothics and Emos. Once you decide which cultures/subcultures you will research, use relevant keywords in your library search.Com..

What happens to the voltages on each bus : EE491 - Project II Keep repeating the simulation while increasing the clearing time by one cycle at a time till the system becomes transient unstable. What is the critical clearing time - Apply the equal area criterion to check for the transient s..

What are some common myths about life insurance : What are some common myths about life insurance?- Why is permanent life insurance more expensive than term life insurance?

Define slot time regarding csma/cd : The MAC handles fault recovery with the token bus access scheme. Name at least four faults that can be handled by the MAC in this case ? Define slot time for token bus

User Account

All Pages