An insurance company is considering the introduction of an investment-only product that provides a claim based on the accumulated value of premiums paid by a policyholder. Policyholders would pay annual premiums of X at Year 0, 1, 2, ..., n -1 and would receive a claim equal to the accumulated value of the premium payments at Year n . Unless told otherwise, for the following questions use an interest rate of 4% per annum and assume that n=25. Assume also that, for the moment, and until told otherwise, policyholders do not die during the 25 year policy period.

Question 3

A policyholder is wishing to receive a claim payment of $300,000. Calculate the value of the premium payment X , that will provide this claim payment.

Question 4

All other things remaining equal, what impact would a value of n= 30 instead of n= 25 have on the calculated value of X in Question 3 for a claim payment of $300,000?

A) X is higher when n =30 compared to n =25

B) X is the unchanged when n= 30 compared to n =25

C) X is lower when n= 30 compared to n =25

NOTE:(I put tow Questions b.c it's related )