A high-pressure life insurance salesman was heard to make the following argument: “At your age a $100,000 whole life policy is a much better buy than a similar term policy. Under a whole life policy you’ll have to pay $2,000 per year for the first 4 years but nothing more for the rest of your life. A term policy will cost you $400 per year, essentially forever. If you live 35 years, you’ll pay only $8,000 for the whole life policy, but

$14,000 15 $400 # 352 for the term policy. Surely, the whole life is a better deal.”

Assuming the salesman’s life expectancy assumption is correct, how would you evaluate this argument? Specifically, calculate the present discounted value of the premium costs of the two policies assuming the interest rate is 10 percent.