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Yield on 34 year policy
18 Apr 2020 (60 views)

Dear Mr. Tan 
I paid $112,234 for my whole life insurance premium for 34 years, I can get back $170,000 if I surrender the policy, does that mean the yearly yield for this policy is 5.1%? Thank you.

Reply
The annual premium is $3,301.
I used the RATE function in Excel and obtained the yield of 2.26%.
This is the compounded yield.

If you had earned 5.1% p.a., the accumulated value at the end of 34 years would be $301,096. It would almost be double of $170,000.
 


Yield on 34 year policy
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Dear Mr. Tan 
I paid $112,234 for my whole life insurance premium for 34 years, I can get back $170,000 if I surrender the policy, does that mean the yearly yield for this policy is 5.1%? Thank you.

Reply
The annual premium is $3,301.
I used the RATE function in Excel and obtained the yield of 2.26%.
This is the compounded yield.

If you had earned 5.1% p.a., the accumulated value at the end of 34 years would be $301,096. It would almost be double of $170,000.