1. After graduation you will be hounded by insurance agents interested in selling you whole life or universal life insurance. Assume (realistically) that there is a plan which you pay $500 per month for 20 years, and then you have your ($100,000 life insurance policy paid up for life (you never have to pay any more premiums, but you are guaranteed a $100,000 payout when you die). You make the first payment right now, and then at the end of each month for a total of 240 payments. You want to compare the value of that plan to buying term insurance which costs you $112 per month for a $100,000 policy with the rate guaranteed for 20 years (in other words you would pay the $112 monthly premium for 20 years, then drop the policy and your coverage would end). The relevant comparison is to look at investing the difference (between the $500 and the $112) and see how long it would take you to accumulate the $100,000 in an account so you could self-insure. Assume you can earn 7.5% (annual) on the invested difference (but remember you are investing and compounding monthly). How long will it take you to accumulate $100,000? How much will you have accumulated at the end of 20 years? Solve the problem using the Brute Force Method for finding Future Values in a spreadsheet.

Should you buy the universal life, or buy the term insurance then self-insure?