Suppose that, when you die, the proceeds of a life insurance policy will be deposited into a
Question:
Suppose that, when you die, the proceeds of a life insurance policy will be deposited into a trust fund that will earn 8% interest, compounded continuously. According to the terms of your will, the trust fund must pay to your descendants and their heirs c1 dollars (total) at the end of the first year, c2 dollars at the end of the second year, c3 dollars at the end of the third year, and so on, forever. The amount that must be in the trust fund initially to make the kth payment is cke-0.08k, the present value of the amount to be paid in k years. So the life insurance policy should pay a total of ∑∞k = 1cke-0.08k dollars into the trust fund to provide for all the payments.
How large must the insurance policy be if ck = 10,000(.9)k for all k?
Step by Step Answer:
Calculus And Its Applications
ISBN: 9780134437774
14th Edition
Authors: Larry Goldstein, David Lay, David Schneider, Nakhle Asmar