Question 9. The following questions illustrate nonannual compounding.

Question 11.

a) One hundred dollars is placed in an account that pays 12 percent. How much will be in the account after one year if interest is compounded annually, semiannually, or monthly? b) One hundred dollars is to be received after one year. What is the present value of this amount if you can earn 12 percent compounded annually, semiannually, or monthly? 11. You purchase a $100,000 life insurance policy for a single payment of $35,000. If you want to earn 9 percent on invested funds, how soon must you die for the policy to have been the superior alternative? If you die within 10 years, what is the return on the investment in life insurance? (Morbid questions, but you might want to view life insurance as an investment alternative. As one financial planner told the author, "Always look at the numbers; analyze life insurance as an investment.")