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Cost benefit analysis

AN ENGINEER RECEIVED BY MAIL THE PROMOTION SHOWN BELOW FROM A LIFE INSURANCE COMPANY.HE HAS A NEW BORN CHILD AND WOULD LIKE TO INSURE THE CHILD,BUT DOES NOT KNOW THE OPTIMUM CHILD AGE AND THE BEST COVERAGE AMOUNT HE SHOULD SIGN UP FOR. HE NOTICES THAT THE MONTHLY PREMIUM STAYS THE SAME FOR EACH AGE GROUP SO THAT IT COULD BE LESS EXPENSIVE IF HE WAITED TILL THE CHILD WAS NEAR 7,15,21,OR 25 YEARS OLD. HE ALSO NOTICES THAT LOWER INSURANCE RATES ARE FOR THE YOUNGER CHILDREN WHO WOULD END UP PAYING SMALLER PREMIUMS BUT FOR LONGER PERIODS. HE NEEDS TO DECIDE ON THE BEST DEAL WHICH NATURALLY DEPENDS ON A VARIETY OF ASSUMPTIONS WITH REGARD TO THE INTEREST RATE, CHILD'S LIFE EXPECTANCY AND INFLATION RATE,ETC. WHICH PLAN WOULD YOU ADVISE HIM TO PURCHASE AND AT WHAT AGE OF THE CHILD.

AGE 0-7
$5000.00 COVERAGE- $2.43 A MONTH
$10000.00 COVERAGE- $4.10 A MONTH
$15000.00 COVERAGE- $5.78 A MONTH
$20000.00 COVERAGE- $7.45 A MONTH

AGE 8-15
$5000.00 COVERAGE $3.24 A MONTH
$10000.00 COVERAGE $5.56 A MONTH
$15000.00 COVERAGE $7.88 A MONTH
$20000.00 COVERAGE $10.21 A MONTH

AGE 16-21
$5000.00 COVERAGE $4.05 A MONTH
$10000.00 COVERAGE $6.89 A MONTH
$15000.00 COVERAGE $9.72 A MONTH
$20000.00 COVERAGE $12.55 A MONTH

AGE 22-25
$5000.00 COVERAGE $4.59 A MONTH
$10000.00 COVERAGE $7.95 A MONTH
$15000.00 COVERAGE $11.31 A MONTH
$20000.00 COVERAGE $14.67 A MONTH

PAY ONLY $1 FOR THE FIRST 3 MONTHS FOR UP TO $20000.00 LIFE INSURANCE COVERAGE

Solution Summary

Cost benefit analysis is depicted.

$2.19