Determining the Cost of Insurance. Suppose you are 30 and have a $25,000 face amount, 20-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $225. The cash value of the policy is expected to be $3,000 in 20 years. Using time value of money and assuming you could invest your money elsewhere for a 5 percent annual yield, calculate the net cost of insurance.

LO12-6