1. Carl currently owes $20,000 in credit card debt at a typical 22% annual interest rate. According to the agreement with the bank issuing the credit card Carl's required minimum monthly payment is $367 per month. If Carl chooses to cancel the credit card, and commits to paying off the credit card loan over time with constant monthly payments equal to $367 per month, how many months will it take Carl to repay the $20,000 loan? [Please round your answer to the nearest month, and use that number of months in all the applicable calculations in the rest of this assignment below.]

1. Instead of paying off the credit card debt at $367 per month as stipulated above, Carl has an alternative two-part plan for repaying the $20,000 credit card debt. This alternative plan makes use of Carl's seasoned whole life insurance policy with a cash value of $140,000 that earns 5% annual interest. According to the first part of this alternative two-part plan, Carl will borrow $20,000 from the insurance company at 5% annual interest using the cash value of his life insurance policy as collateral, and will then use the proceeds of this loan to immediately pay off the credit card debt of $20,000. His plan is to repay the insurance company loan with monthly payments over the same number of months indicated in your calculation in the previous paragraph. What is the amount of the monthly payment that will be required in order to pay off the $20,000 insurance company loan in accordance with Carl's alternative plan? [Please round your answer to the nearest dollar, and use that number in all the applicable calculations in the rest of this assignment below.]

1. The second part of Carl's alternative plan is to determine the difference between the $367 monthly payment that would have been paid to the bank on the credit card debt and the monthly payment paid to the insurance company on his $20,000 loan with them in accordance with the alternative plan, and apply this difference on a monthly basis to the build-up of the cash value of the life insurance policy that earns 5% annually. In other words, Carl will be paying a total of $367 per month to the insurance company, part of which will serve to pay off the $20,000 loan and part of which will add to the cash value of the whole life insurance policy. Assuming the insurance policy earns 5% per year and that there are no other transactions in his policy during this time period, what will be the cash value of Carl's life insurance policy after he makes his final payment as stipulated in this alternative plan? [Please round your answer to the nearest dollar, and use that number in all the applicable calculations in the rest of this assignment below.]

1. Under both the bank's plan and Carl's alternative two-part plan, Carl will be paying a total of $367 per month for the number of months calculated in the first paragraph above. This being the case, how much better off will Carl be, in present-value terms, if he uses his alternative two-part plan instead of the bank's required payment of $367 per month, assuming Carl has an annual rate of time preference of 5%? In other words, what is the value (in today's dollars) of Carl's decision to use his whole life insurance policy as a financing vehicle in the situation outlined herein?[Please round your answer to the nearest dollar.]