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Question: Thompson has a fear that if he should be struck by Critical Illness he would burden his family Should this unfortunate event happen, he would like to receive RM60,000 per year over a period of 10 years He would need a one time RM80,000 to buffer for traditional treatment cost. Thompson's adjusted rate of return is 2%. how much must be set aside today to protect himself? (use financial calculator to calculate) (ensure mode is set to beginning and compounding is set to annual). Thompson would need critical illness sum assured of RM__________. On top of that, he would need an additional RM80,000 for traditional treatment. Hence his total critical illness sum assured would be RM__________

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To calculate the present value of Thompson's desired critical illness sum assured, we will need to use the time value of money formula. In this case, we have a series of equal payments (annuity). Thompson would like to receive RM60,000 per year over a period of 10 years. The adjusted rate of return is 2%. First, we will find the present value of the annuity. PV = PMT * [(1 - (1 + r)^(-n)) / r] Where: - PV = present value - PMT = payment amount per period (RM60,000) - r = interest rate per period - n = number of periods In this case: - PMT = RM60,000 - r = 0.02 (2% expressed as a decimal) - n = 10 PV = RM60,000 * [(1 - (1 + 0.02)^(-10)) / 0.02] PV = RM60,000 * [(1 - 0.8205) / 0.02] PV = RM60,000 * [0.1795 / 0.02] PV = RM60,000 * 8.9724 PV = RM538,346 Thompson would need a critical illness sum assured of RM538,346, but he would also like an additional RM80,000 for traditional treatment costs. To find the total critical illness sum assured, we add the two values: Total critical illness sum assured = RM538,346 + RM80,000 Total critical illness sum assured = RM618,346 Thompson would need a critical illness sum assured of RM538,346, plus an additional RM80,000 for traditional treatment cost. Therefore, his total critical illness sum assured would be RM618,346.

June 18, 2023, 7:25 p.m.

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